The Centre's demonetisation move has come as a reality checkfor the realty market in the national capital region with registration ofproperties dipping by almost 30 per cent while kindling hopes of cheaper flatsamong prospective buyers.
Transactions in the sector usually involve a significantamount of cash exchange aimed at avoiding tax by under-reporting the value ofthe deal. But with such hidden money moving out of the market, prices arestarting to tumble. With the government scrapping 86 per cent of availablecurrency notes, registration of flats, plots and shops in Delhi has gone downby almost 30 per cent while in Gurgaon, the dip is nearly 25 per cent.
Real estate data and analytics platform PropEquity predictedlast month that the cash squeeze will wipe out over Rs 8 lakh crore worthmarket value of residential properties sold and unsold by developers since 2008across 42 Indian cities.
According to Delhi government's revenue department, a totalof 7,028 properties were registered in the Capital in October, but the numbercame down to 4,417 in November. In Gurgaon, the registries - of both commercialand residential real estate - has dropped from nearly 4,000 a month to lessthan 3,000, an official said. "The revenue from registration of propertiesin Gurgaon was nearly Rs 20 lakh a day before November 8 but since then thecollection has declined to Rs 10-12 lakh per day. This is mainly because suchtransactions are made in cash," he said.
A senior official from Delhi's revenue department said therewas a noticeable difference between the months of October and November."It is certainly due to demonetisation, but that cannot be the only thing.To some extent, there might be general downslide in real estate," he said.Experts said this would bring down housing prices in NCR. Anoop Khari, abuilder and real estate holder from Mehrauli, said, "Almost a third oftransactions in real estate is made through black money. With the big currencynotes banned, the market has taken a hit. The legal financing channelsaccounted for only a small part of all transactions in this space as Rs 500 andRs 1,000 notes as transactions in this segment involved lots of cashpayments."
Khari added that demonetisation will make it very difficultfor any purchaser to pay in cash and for the seller to accept the old currency."If the seller is not accepting old money or through legal channels, thiswill automatically bring down sale and purchase of properties."
Anshuman Magazine, chairman of Commercial Real EstateServices, struck a different note. "While it may cause some worry in thenear future, it looks positive in the long term," he said. "It willcertainly help the real estate industry move towards transparency. Severalsteps taken by the Government in recent times - from the Real Estate RegulationAct and GST, to Real Estate Investment Trust - combined with this announcement,will further improve transparency and increase investor confidence in the realestate market in the long run." With the Modi government also making itsintentions clear of acting against benami properties, experts feel prices maycool further in the coming months.
A real estate consultant said the only hope now is that oncethe demonetisation drive stabilises, banks will extend more housing loans.Industry insiders said the currency ban is expected to give a sales push asbanks would be willing to lend more at attractive rates to those keen to buyflats and properties. This, however, will take at least four to six months,they said.
"We all know that large numbers of transactions aremade in cash in the real estate sector," said property dealer Ravi Kumarfrom south Delhi's Jasola area. "At present, there is a shortage of cashand sellers are not accepting old currency. So, there would be a decline in thesale and purchase of property."
Hemant Sharma, a real estate dealer from south Delhi, said:"If a 3BHK flat costs Rs 2 crore and the buyer wants to take it with newcurrency notes, he can easily get the apartment for Rs 1.70 crore, with adiscount of 15 per cent. But if the buyer is paying in old currency, there ishardly a drop in price."
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