On November 27, CREDAI, the apex body of private real estate developers’ associations came out with a statement in support of demonetisation. The statement had a few interesting points. It said: “CREDAI denies adverse impact on the primary real estate market arising out of demonetisation. In fact, the primary segment is expected to gain at a rate of 15 per cent YoY,” the statement said. It also said prices of available real estate units “won’t fall any further” due to demonetisation.
Fast forward to February 23, 2017. The FICCI-Knight Frank report, which assessed the impact of demonetisation on the real estate sector, came out with some key findings. It said the sale of housing units declined by 45 per cent in the October-December 2016 period. In absolute terms, 73,769 units were sold in the October-December 2015 period. This number declined to 40,936 in October-December 2016 period. “Demonetisation pulled down last quarter sales across all cities. Despite one-third of the fourth quarter being the festive season, sales fell by 40 per cent,” the report said.
Both the State and Central governments are estimated to have lost revenue to the tune of over Rs 22,500 crore, a figure that also includes loss on Stamp Duty. The report further termed demonetisation as a “major disruption during Q4 2016” that led to a “drastic fall” in current sentiments to below the threshold mark of 50 to become the “worst quarter” in the last three years. This implies that stakeholders’ sentiments pertaining to Q4 2016 is “pessimistic,” it said. As per the report, the demonetisation move infused a “high degree of uncertainty and confusion” in the market, but went out to balance the sentence by adding that “this impact seems to be transient in nature” and that the mid-to-long term impact is expected to be positive”.
The report termed demonetisation as a “rude awakening” for the entire economy with the real estate sector being at the “receiving end” of this move. The real estate sentiment index, based on a quarterly survey of key supply-side stakeholders, including developers, private equity funds, banks and non-bank financial companies (NBFCs), fell to 41 from 58 in the previous quarter.
Will the government, developers and the other stakeholders get together to respond to the crisis? One wonders.
BW Reporters
Ashish Sinha is an experienced business journalist who has covered FMCG, auto, infrastructure, tourism, telecom among several other beats. Ashish has keen interest in the regulatory scenario impacting different sectors. He writes on aviation, railways, post and telegraph, infrastructure, defence, media & entertainment, among a wide variety of other subjects.
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