#DemonetisationAnniversary: Property sales plunge in Ahmedabad post currency ban


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Demonetisation story Ahmedabad

Last year’s demonetisation drive cracked a whip on the black money in circulation in India. The move, although instrumental to kick-start the country’s economy in a transparent manner, proved detrimental to all businesses in short-to-mid-term. Being largely driven by cash, the real estate sector, however, bore the brunt with its adverse impact being noted until a year later. On the first anniversary of the currency ban move, 99acres.com analyses how the realty landscapes of metro cities have performed under the influence of demonetisation coupled with other reforms such as RERA and GST.

The currency ban move was aimed at freeing the Indian economy of the unaccounted cash and black money transactions. The government’s decision to tighten the noose on the masses proved detrimental to the health of several businesses across industries. The real estate sector, which is largely driven by cash transactions, received the biggest blow. Ahmedabad, which was already reeling under the pressure of having 20 percent unsold residential stock and poor sales on account of the slow-paced generation of employment suffered massively when the country got ripped off of 86 percent of its currency in circulation.

The business-segment laden city recorded a lower dependency on home loans and thus, witnessed maximum real estate dealings in cash. In fact, reports suggested that the sale of homes valued at Rs 90 lakh and above involved 50-60 percent cash component. As a result, the premium housing market of Ahmedabad emerged as the key sufferer post the demonetisation move.

Amid multiple market distractions, cash crunch being the most prominent one, buyers withdrew from the real estate landscape and deferred their purchase decisions, immediately bringing the sales volume down by 90 percent in Oct-Dec 2016. Property registrations dropped by a whopping 63 percent as average home sales catastrophically dipped from 2000 to 200 units per month. While property enquiries remained buoyant, they failed to convert into transactions even after hefty discounts from property owners.

The budget-homes category of Rs 30-60 lakh remained upbeat due to a higher incidence of institutionalised finance. However, sales in this segment, too, remained meek in the first quarter after demonetisation owing to dwindled buyer sentiment. The government’s decision to revise Janti rates and budget allocation for the Smart City development did little to boost buyer confidence.

Despite Gujarat emerging as the first state to notify the regulations under the Real Estate (Regulation and Development) Act (RERA), the market remained far from recovery until Apr-Jun 2017. The subsequent Q3 2017, continued to report meagre sales as wary homebuyers decided to fence-sit. As a result, inventory-heavy developing locales of Ghuma, Gota and South Bopal saw residential prices dipping by nearly three to four percent between Jul-Sep 2016 and Jul-Sep 2017. In addition to demonetisation, other factors such as the inefficient implementation of RERA and a higher 12 percent tax incidence under the new GST regime also played a key role in keeping the market sentiment subdued.

The impact of the currency ban move did not stay restricted to buyers, but also engulfed the developers who were left with a massive liquidity crunch to even continue the construction of ongoing projects. Soon, new launches in Ahmedabad came to a grinding halt. Compared to 8,809 housing units launched between January to June 2016, there were only 1,874 units launched in the same period in 2017. This was a 79 percent decline, the largest across metros. Besides managing finances for completing existing projects, the downfall in new project launches was also a result of the ambiguities pertaining to the implementation of RERA.

Amid falling sales and plunging confidence in the real estate sector, the rental market gained traction. Although excess housing stock kept rental ‘ask’ rates under check, several locations in the West, especially close to the SG Highway reported healthy traction from end-users.

Overall, Ahmedabad’s residential sector witnessed a significant brunt of the currency ban move and the subsequent regulatory reforms such as RERA and GST. The absence of a budding employment hub, too, marred sales in this industrial city. 

Market Analysis

Ahmedabad Story_demonetisation


Impact of Demonetisation

Primary Residential Market

The fresh inventory in Ahmedabad was one of the worst impacted across metros. Immediately post demonetisation, developers stalled ongoing projects and deferred new launches. Between H2 2016 and H1 2017, the new project launches dipped by a whopping 79 percent. The cash crunch triggered by note ban shifted the focus of both builders and buyers towards lower ticket sized homes. Out of the limited housing stock launched in H1 2017, 57 percent belonged to the affordable segment with a price tag of Rs 25 lakh and below. Majority of these launches were reported in North Ahmedabad locations such as Chandkheda, Gota, Motera and Ognaj. Naroda in the East, too, hosted a lion’s share of the new launches that happened in the first half of 2017.

The cumulative impact of demonetisation and RERA resulted in lowered demand for under-construction homes which was met by an outpacing rate of decline in new launches, helping the city shrink the excess unsold stock to 32,000 units. While the city reported a 21 percent supply of under-construction apartments in Oct-Dec 2016, it reduced to 12 percent in Jul-Sep 2017.

Despite the mounting pressure on developers to offload piling stock, they refrained from slashing property rates owing to lower margins. This resulted in average weighted prices in the primary market to buoy in the long term.


NJ Quote


Secondary Residential Market

The resale market in Ahmedabad received a massive blow post demonetisation, as sales across budget segments came to a standstill. With 50-60 percent cash component involved in sales of homes priced over Rs 90 lakh, buyers withdrew from the market rather quickly.

The budget homes segment, too, recorded meek demand owing to multiple market distractions. A few buyers tried renegotiating, however, not many reached an agreeable deal, leading to plunging sale figures in the first two quarters after demonetisation. The muted buying sentiment was reinforced by the ambiguities pertaining to RERA and GST from Q2 2017 onwards. This kept buyers at bay as a result of which average weighted prices reported only marginal fluctuations in the last one year. 

Prices trends in the popular micro-markets of Ahmedabad


Current ‘ask’ rates*

Capital Growth**

Growth Drivers




  • Low demand for premium areas restricted price growth




  • Availability of affordable stock boosted demand
  • Oversupply led to stagnancy




  • Strategic location along SG Highway and growing commercial and retail markets thrusted residential prices




  • Good connectivity and presence of quality residential stock maintained housing demand




  • Location along SG Highway and affordability quotient driving demand

* Current ‘asks’ are median rates for listings in the respective localities posted on 99acres.com in Jul-Sep 2017 – both resale and new projects

**Capital growth is calculated basis the changes in average weighted ‘asks’, YoY – Jul-Sep 2016 vs. Jul-Sep 2017

Rental Market

Like other cities, muted buying sentiment benefitted the rental market in Ahmedabad, however, excess housing stock at most of the popular locations kept rental ‘ask’ rates under check. As a result, the rental rates in Ahmedabad witnessed a moderate three percent hike in the last one year. Localities offering affordable rental inventory such as Motera, Vaishnodevi Circle and Chandkheda remained the most popular choice amongst the tenant community and recorded maximum leasing activity. 

Demonetisation rental graph Ahmedabad

 National Outlook

National Outlook_Demonetisation

Ahmedabad’s residential landscape has remained muted in terms of demand, sales and new launches on account of demonetisation, RERA and GST. The market has failed to recover amid multiple positive moves such as revision of circle rates, progress towards the Smart City project and even inauguration of the Ahmedabad-Mumbai bullet train. The appointment of an Interim Regulator, too, did little to uplift buyer sentiment. The market is expected to continue reeling under the pressure created by these multiple regulatory reforms until there is clarity over RERA. The business could revive post developers and projects start registering under RERA at a healthy pace. 

Expert Opinion

By Ashish R Puravankara, MD, Puravankara Ltd

By Niranjan Hiranandani, Founder & CMD, Hiranandani Communities

By Aaron Solomon, Partner, Solomon & Co

By Saurabh Jindal, JMD, SVP Group

By Sanjay Jain, Group Managing Director, Siddha Group

By Arjunpreet Singh Sahni, Executive Director, Solitaire Group

By Pankaj Kumar Jain, MD, KW Group

By Mukund Patel, MD, Rutu Group

By Shishir Baijal, Chairman & MD, Knight Frank India

By Manju Yagnik, Vice-Chairperson, Nahar Group

By Aashiesh Agarwaal, Founder & Managing Partner, Pinakin Advisors LLP

By Anuj Puri, Chairman, ANAROCK Property Consultants

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. 99acres does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.

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  • Comments
  • Nikunj Adeshra November 8, 20174:24 pm

    Good Article by 99acres!
    Keep me updating with such type of articles.

  • Lalit Chitalia November 9, 201711:00 am

    Let me know price for adani shanti gram property all detail it will goings to up or dowan

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