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Demonetisation:Builders rule out cuts in real estate prices

Analysts, however, contend that price cuts especially in luxury apartments are inevitable

mumbai Updated: Nov 27, 2016 01:02 IST
Naresh Kamath
Experts have said that the fall in prices of luxury apartments was inevitable and builders will start offering freebies to buyers in coming months.
Experts have said that the fall in prices of luxury apartments was inevitable and builders will start offering freebies to buyers in coming months. (HT File Photo)

Experts and analysts have been predicting a fall in prices of houses after the Centre’s decision to demonetise old Rs500 and Rs1,000 notes, but builders have ruled out any such cuts. They, however, said that buyers will benefit from cuts in banks’ interest rates on home loans and offers to attract buyers. They also have said that the real estate sector will take at least six months to recover.

Experts, however, have said that the fall in prices of luxury apartments was inevitable and builders will start offering freebies to buyers in coming months.

According to the Confederation of Real Estate Developers of India (CREDAI), there was no question of any price cuts. Getamber Anand, President, CREDAI (National) who called the demonetisation a game changer for the realty sector. “The picture will be bleak for the initial period, but then it will really help the real estate sector. The interest rates on home loans will come down significantly and this will ensure an increase in transactions,” he added. “The builders with reputation will remain, while the fly-by-night operators will have to shut shop,” said Anand.

“The real-estate prices have remained stagnant over the past three years, while the incomes of home buyers have increased during the same period. The prices have become affordable now,” said Mayur Shah, managing director, Marathon Realty Private Limited. However, he said that post demonetisation, it will take some time to stabilise.

Analysts, however, contend that price cuts especially in luxury apartments are inevitable. “There is a huge stock of unsold inventory of more than 2.49 lakh units in the Mumbai Metropolitan Region, which includes 93,000 houses in Mumbai alone. We will see a correction in the coming days, especially in the case of luxury houses,” said Pankaj Kapoor, CEO, Liases Foras, a real estate research firm. He said the coming months will witness builders offering various freebies and offers to the buyers.

The real estate has been in slowdown mode for the past few years as builders raised their prices to exorbitant levels. This exorbitant pricing of apartments coupled with a recession in the economy and high interest rates resulted in most postponing their purchase plans.

Effects of demonetisation on real estate

1) The realty market will become more of an end-user market rather than a speculative one dominated by investors.

2) Most of the transactions will be done by cheque and cash transactions will decrease significantly.

3) The realty prices will eventually come down as the land prices, which amount to at least 50 % of the project costs will also reduce significantly as black money will hardly find a place after demonetisation

4) This will weed out the builders who thrive on black money.

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