The reality of real estate sector post demonetisation
<p style="text-align: justify;">Demonetisation has been both negative and positive for the real estate sector: on the one hand, the market saw a slump in the number of units bought, but on the other, some of the transactions were registered above guidance value, indicating that they were done in whi
Published -
Nov 7, 2017 4:23 AM
Demonetisation has been both negative and positive for the real estate sector: on the one hand, the market saw a slump in the number of units bought, but on the other, some of the transactions were registered above guidance value, indicating that they were done in white. The lethargy in the market is evident in the steep drop in number of documents registered in Karnataka following demonetisation, when compared to the corresponding period in the previous year. While 19.07 lakh documents were registered between November 1, 2015 and October 31, 2016, only 17.27 lakh documents were registered between November 1, 2016 and October 31, 2017. This is a fall of 9.45% (1.8 lakh documents). The State’s revenues, too, felt the pinch from ?8,326.09 crore to ?7,871.42 crore, a drop of 5.46% during the same period. The slump in the market was most severe in the five months that followed demonetisation from November 2016 to March 2017. The State missed the revenue target by over ?900 crore during the same time. That said, the market picked up pace in the new fiscal from April, but it still has to recover as it was impacted by the Real Estate (Regulation and Development) Act, 2016 and Goods and Services Tax (GST), industry insiders say. Though there has been little evidence to suggest a price crash — as ominously predicted immediately after demonetisation — the biggest is the reduction in black money in real estate, said Suresh Hari, vice-chairman, CREDAI – Bengaluru. “Earlier, the ratio of white to black in realty transactions was around 60:40. But now, since black money isn’t easily available, we are seeing this ratio tilt more towards white. There is a small number of transactions that are being registered over and above guidance value. But the number of such transactions are still low,” said a senior revenue official. For instance, even with a drop of nearly 10,000 documents registered from April to October 2017 compared to the corresponding time in 2016, the Revenue Department overshot its revenue target by ?70.8 crore. “This indicates that there are some transactions registered above guidance value,” the official said. But why have the prices not fallen? “Ours is a seller market. Except distress sales, where there have been instances of reduced price sales, no seller is ready to sell their property at lesser rates. Sellers are waiting out the period instead of selling at lower rates. This is what has created a slump and reduced the number of transactions in the market,” said a senior sub-registrar in Bengaluru. However, property consultant R. Ramesh, said that with RERA and GST, the realty market was in a stabilising phase and the slump is expected to continue for another year. “Sellers not ready to sell, if it continues for a couple of months, will create a demand-supply imbalance and may in fact shoot up the prices,” he said.
Tags : News/Views