Demonetisation Structurally Positive For Real Estate Sector

The short term impact of demonetisation of high value currency notes was drastic, causing the realty stocks to collapse like a pack of cards initially. However, in the long run, the demonetisation move may have a beneficial effect with decline in interest rates on home loans and decline in the influence of black money on the realty sector. Abhishek Kumar and Arshad Hippargi bring this report for our reader-investors:

- 

The Indian real estate sector, which comprises of four major sub-sectors, viz., housing, retail, hospitality and commercial, was witnessing a slack in demand over the last couple of months. The real estate market in India was in the grip of rigid prices and plunging demand. As per PropEquity research report, the July– September quarter of key residential markets across India remained fragile and the housing demand across key cities declined 22 per cent, largely on account of muted end-users demand even when developers continue to offer heavy discounts and benefits. Capital values across cities remained under pressure. As per latest available statistics, only Noida and Mumbai were able to register a marginal price increase of two and one per cent, respectively. Many real estate giants believe that the sector is going through a transition phase that will hamper unethical practices and eliminate unorganised developers. The real estate players got goose bumps when PM Narendra Modi announced the government’s decision to demonetise the high denomination currency notes as they realised that they will be adversely affected by the move.

TO HIT PRICES 

As per the PropEquity report, housing prices in 42 major cities across India could drop up to 30 per cent over the next 6-12 months after the demonetisation of high-value notes, wiping out over ₹8 lakh crore worth of market value of sold and unsold residential properties since 2008.