Ultra-luxury apartments costing above Rs5 crore, which have been in slowdown mode in recent years has suffered a massive blow owing to the demonetisation scheme of the central government. There are indications that this ultra-luxury segment could witness a reduction in prices.
The reason: A majority of the buyers of this segment are businessmen and entrepreneurs who used to deploy a substantial amount of cash or unaccounted money while buying these apartments.
Currently, there are approximately 9,300 such high-end apartments in places like Worli, Dadar, Bandra, Lower Parel, Malabar Hill, Santacruz and Palm Beach Road in Navi Mumbai.
However, the recent demonetisation move has virtually wiped out their unaccounted wealth.
According to Liases Foras, a real estate research firm, unaccounted money played a key role in this high end sector. “Most of these buyers were businessmen who used to invest huge amount of cash to purchase these high- end properties. Now they won’t be able to transact with cash anymore,” said Pankaj Kapoor. “These were the buyers who by infusing large amount of unaccounted money were responsible for driving the costs high,” he added.
Builders do agree that it will be difficult. “Most of the buyers gave money in cash to escape the high rate of taxation,” said a leading builder who did not wish to come on record. The taxes like the stamp duty, registration, value added tax (VAT) as well as income tax all depended on the white money which is paid. However, Ashok Mohanani, chairman and managing director, Ekta World Private Limited called it a temporary phenomenon adding that the developers dealing in payments through cheques or other formal methods won’t get affected much. “It will affect us momentarily,” said Mohanani, who has high-end projects in Bandra and Dadar. The real estate sector has been in slowdown mode for the past few years, of which the luxury segment is the worst hit. The exorbitant pricing of apartments coupled with recession in economy along with high interest rates on home loans resulted in most buyers postponing their purchase plans. Most of the builders who had initially planned luxury projects years ago then shifted to compact small-sized apartments to generate sales.