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Demonetization hits real estate builder prices, but not resale flats – report

Demonetization of 500- and 1000-rupee notes hurt the real estate sector in North India, while its impact on the sector in South India was negligible, according to Magicbricks’ PropIndex for Jan-March 2017.

The report, brought out by the eponymous real estate classifieds site, also found that the builders were more willing to reduce prices in the aftermath of demonetization compared to individual sellers.

“While real estate prices had already hit rock bottom this year, the demonetization put further pressure on ready-to-move prices, which are going to be affected in the next couple of quarters also due to effect on liquidity post demonetization.

“On a quarterly level, the South was the only region which inched up visibly in terms of prices from the last quarter, while (prices) in north fell the most,” said the report. “..overall the realty market scenario remains weak.”

“While some segments have shown impact of demonetization, there is no evidence of drastic price correction in the secondary or resale market,” it added.

The report pointed out that the demonetization drive was supposed to have seen a correction in prices due to the sucking out of ‘black money’ from the system, but “four months after the government launched the demonetization drive, the secondary or resale market is yet to show any serious impact of this exercise.”

Part of the reason why there was hardly any impact on the resale market could be that individual sellers are in no hurry to sell their investments.

On the other hand, builders cannot hold on to their ready flats for long, and must sell their inventory at whatever prices they can so as to keep the cash flows going and continue their construction activities.

The report is based on price trends in over 750 localities in 14 cities, for Jan-Mar 2017 quarter shows that

Within the builder segment, the price correction was higher in the finished flats category compared to the under-construction segment.

NORTH AFFECTED MOST

The biggest impact of the anti-black money move has been on the prices in the National Capital Region in and around Delhi.

“New Delhi, Ghaziabad and Gurgaon in the National Capital Region (NCR) continue to witness price decline. Delhi, in fact, has had the highest price decline over Sep 13-Mar 2017 period amongst all cities across India,” the report found.

“On the other hand, South Indian cities like Bengaluru, Hyderabad and Chennai continue to post marginal price increments. Compared to cities in NCR which witnessed large investor interest, South Indian cities have had larger share of end-users. High end-user to investor ratio ensures that prices do not see drastic movement in either direction,” it said.

Mumbai Metropolitan region also saw price corrections, but Navi Mumbai — which comes within Mumbai Metropolitan Region, was an exception as there was a “marginal price increment” during the quarter.

In Navi Mumbai 61% of the localities saw an average price increase, while the balance 35% of the localities saw fall has seen a marginal incremenIn Mumbai city, 46% areas saw an average price increase in contrast to the balance 54% of the localities which saw fall in the prices.

In Thane, 36% of the localities saw an average price increase while 60% localities witnessed a price drop and 5% localities performed neutral for the quarter.

Pune had 46% areas with price increase. On the contrary, the balance localities of Pune i.e. 54%, saw a drop in prices.

In Ahmedabad 70% localities saw a price increase while the balance of the city localities recorded a fall in prices.

Noida had 60% localities with an average price drop in contrast to the 37% of the city’s localities which saw a rise in the prices.

Greater Noida had 41% areas with a price increase while 53% localities of the city saw fall in prices, while Ghaziabad had 72% localities with a price decrease.

New Delhi had 78% of the localities with price decrement, while the percentage was 70 for Gurgaon.

Chennai witnessed rise in prices for 56% of the localities while 41% of the localities saw a drop.

Hyderabad had 54% localities with an average price increase in contrast to 46% of the localities seeing a drop in prices.

Bengaluru had 65% areas with an average price increase, while Kolkata had 55% localities with an average price increase.

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