The real estate sector recorded its worst performance in seven years as residential sales in 2016 plummeted to a measly 60,374 units in the Mumbai Metropolitan Region (MMR) compared to 1.08 lakh units sold in 2010.
The MMR covers Mumbai, Navi Mumbai, Thane and Raigad regions.
The situation is equally grim with new launches as they dipped to 34,190 houses compared to 1.38 lakh units in 2010.
The past three months saw a 50% drop in sales as the number of flats sold dipped to 8,617 units compared to last year, while launches slipped by 70 % to just 2,617 houses.
Experts blame the trend to demonetisation, which forced both buyers and builders to postpone their decisions.
According to Gulam Zia, executive director, Knight Frank India, the real estate consultancy firm, demonetisation triggered off an atmosphere of uncertainty in the MMR. “The buyers shelved their purchase plans because there was no clarity in the realty market. This resulted in a steep decline in sales,” said Zia. “The markets that were in recovery mode suddenly faced a jolt and sales took a huge hit,” he said.
Builders, however, ruled out any such price cuts saying it was not feasible for them. However builders have come out with various schemes and payment options to induce buyers.
Builders, too, agree that sales and launches did suffer a setback in the past two months. “We were waiting for the demonetisation effects to die down so there was no point launching projects at such a time.” “There is positive sentiment with banks having started reducing the interest rates on home loans. This will trigger sales in a big way,” said Ashish Shah, chief operating officer, Radius Developers. He said the coming months will witness new launches.
Another major advantage would be that builders and banks are working out customised financial solutions for buyers to boost sales. This would be in the form of subvention schemes where buyers have to pay 5% initially and then the rest on possession or flexible payment options.
According to Knight Frank, however, the picture still remains hazy and this will continue for at least the next three months, until things stabilise. Now, various factors like the real estate regulator, GST along with the Benami Transaction (Prohibition) Amendment Act will play a major role in shaping the future course of the sector.
The real estate industry in the last few years has been going through a tough phase. Builders raised prices to exorbitant levels forcing many buyers to postpone their purchase plans. In addition, the Reserve Bank of India laid down stringent lending norms as well as hiked interests on home loans.