Demonetisation, along with other reforms such as the Benami Transactions Act and the Real Estate (Regulation and Development) Act, has definitely brought about a massive change in the market. Though the commercial market is likely to grow strong, revival of the residential market still needs time.  

The possibility of a reduction in consumer demand is one of the major concerns faced by the real estate industry post demonetisation, avers Shishir Baijal, Chairman and Managing director, Knight Frank India in an exclusive interaction with

Three years post-demonetisation is the industry still reeling under the impact it brought along?

Demonetisation brought about a structural change in the industry and altered the premises as well as the way real estate transactions are undertaken. Considering that the decision was complemented with a spate of other policy reforms such as the Benami transactions law, Goods and Services Tax (GST), and the Real Estate (Regulation and Development) Act (RERA), there has been a massive change in the real estate sector.

While the industry has put forth its best efforts in terms of getting back on track, we need some more time to call a revival for the mainstream residential market. To be true, it is only the affordable housing segment where we have seen some green shoots.

How is the current scenario of housing demand and supply in your city?

The market has matured well in terms of supply as well as the demand for residential properties. On the demand front, we no longer see speculative home buying, and it is the end-users who are deciding the fate of a project on the basis of the inherent merits of product on offer. On the supply front, a lot of time and effort is invested by the developer to keep the offerings in line with the consumer expectations, especially with respect to price, house value and corollary amenities.

Was the move successful in rationalising property prices in your city? If yes, to what extent?

While it may not have been an intended objective, there has been an adverse impact on property prices since the decision was taken. Key markets across major cities have witnessed a reduction in the quoted prices up to the extent of 10-12 percent. Moreover, if one considers the indirect discounts on offer, the effective discount is much higher than this.

What are the current challenges that are hampering the realty revival in your city?

 Possible risk of a slowdown in the consumer demand, which may not be cyclical but structural, is the biggest concern at the current juncture. To highlight, the two major challenges faced by the housing sector at present include liquidity crunch for developers on account of the crisis of Non-Banking Financial Industry (NBFC), and the overall economic slowdown. Both these are leading to piling up of unfinished projects and an overall adverse impact on the housing market.

How do you expect the market to fare in the coming 5-6 months?

 The commercial real estate segment, specifically the office and industrial sectors, are expected to continue on their strong demand trajectory. However, revival of the residential market will be a challenging proposition. This is due to the high dependence of the industry on government sops, which are and will be predominantly oriented towards the affordable housing segment.