On the first-year anniversary of demonetisation, 99acres.com takes an account of the real estate performance of top eight metro cities. Experts suggest markets to have started recovering from the aftermath of demonetisation and instead reeling under the pressure created by other reforms including RERA and GST.
While RERA and GST aimed at bringing in transparency, accountability and rationalising taxation, Demonetisation aimed at fighting black money, corruption and terrorism. Among the various regulatory changes aimed at making cash transactions a thing of the past, Demonetisation, was perhaps, the single largest step that directly impacted the ‘parallel economy’. It pushed out the cash component which had played a big role in premium/luxury property sales. Potential property buyers got into a wait-and-watch mode, real estate developers were busy meeting the stringent RERA norms. The combination of all these severely impacted sales, almost bringing it to a standstill. Media reports suggest there were hardly any major new real estate projects launched in Chennai and its peripheral areas. As a result, prices have either remained flat or dipped. The impact on sales has been severe.
Has the initial lull triggered by demonetization continued till now?
Demonetisation has been a major economic reform, and while overall it was good for the economy, it also caused lot of distress. Any major reform has an initial ‘transitory effect’ on the market, it slows down things – although, in the long term, the impact may actually be positive. As we move into the fourth quarter of 2017, what is also referred to as the ‘festive season’, we see the Indian economy and also the Indian real estate working their way out from the slow-down that resulted from demonetisation.
How is the current buyer sentiment? Have you witnessed a change followed by GST or RERA?
It has been a paradigm change, across the real estate industry, one that impacted all stakeholders – homebuyers included. In the past few months, as a result of implementation of RERA, transparency and accountability on part of the real estate developers have gone up, and GST has worked towards rationalising taxation. As a result, buyer confidence seems to have returned. The effect of these regulatory changes is that real estate transactions have gradually started increasing.
How did demonetisation impact the real estate market in the last one year?
Among all the economic reforms implemented by the NDA Government, demonetisation was implemented last year, on 8 November. The year following that has been an eventful and a roller coaster ride for the real estate sector. Things, however, have gradually stabilised after a few ‘teething troubles’ in the beginning.
Did the currency-ban move emerge advantageous for the industry? How?
Demonetisation led to greater efficiencies and transparency in real estate. From that perspective, it has been a welcome step. Similar to the impact on honest taxpayers, demonetisation has helped the sector as well. The regulatory changes brought about by the Government, including demonetisation, are positive for not just real estate but also the economy, in the long run.
Out of the primary and secondary markets, which suffered the most?
Real estate as a whole was impacted. It worked at two levels, buyer confidence and a slow-down in market sentiment. I would say that the primary market was first on the road to recovery, given that RERA and GST worked to enhance buyer confidence in the real estate industry.
Did the city or any zone witness the anticipated ‘price correction’?
This is one question that tends to generalise the scenario across the city and its peripheral areas. The real estate market has changed, with buyers evolving in terms of knowledge and understanding about the market in general, and the location coupled with the segment they want to buy a home in. So, post RERA, we saw transparency coming in, now the buyer knows what he is paying, and for what – over what time frame. So, it is neither city nor zone, ‘price correction’, wherever it has happened, is a result on the equation of demand and supply across different projects.
Do you think uncertainties pertaining to RERA and GST overshadowed the impact of demonetisation?
When demonetization was implemented, it was known that RERA and GST were in the pipeline. It was an accepted fact that these two would bring in a paradigm change, and across real estate projects in different locations. The buyers withdrew from the market – what we would call, became a ‘fence sitter’. This has been a reality across not just Chennai and its peripheries but across the state. Sales did happen post demonetisation, but these were less in number as compared to the same period in the previous year. The sales figures started moving upwards after RERA and GST were implemented. Once potential buyers factored in the impact of the economic reforms implemented by the Indian Government, the ‘fence-sitters’ began making the purchase decisions. Effectively, even though the three economic reforms were implemented at different times between November 2016 to July 2017, most of the ‘fence sitters’ have started taking the ‘purchase’ decision post August this year.
What’s the way forward for Indian realty? How do you think the year would close for the sector?
Since August, we have seen the Indian economy and the real estate sector evolving out of the aftermath of the multiple regulatory changes, including demonetisation. ‘Affordable Housing’ is effectively, the new star on the real estate horizon, as we come to the end of 2017. As positive sentiments rise on the back of initiatives taken by the Government such as ‘PPP model for affordable housing projects’, I expect these to positively impact the Prime Minister’s vision of ‘Housing for all by 2022’. The challenge of creating housing for the common man will most likely be achieved through various initiatives under the Pradhan Mantri Awas Yojana (PMAY). Taking these aspects into account, coupled with enhanced buyer confidence suggests the year will end not as bad as experts had predicted a year ago, when demonetisation was implemented. And, having said that, let me also say that the real estate industry needs support in the form of Government initiatives to help us settle down from the impact of the regulations that have impacted over the last one year. As we come to the one year mark of demonetisation, and even as things seem to be getting back to normal, there exists a definite need for Government initiatives to bring about positive changes to boost business and positively impact the economic scenario.