Real estate markets to make gradual recovery after demonetisation
Low mortgage rates this time will play a big role in the real estate sector’s path to recovery – a U-turn recovery instead of a V-shaped one as the trough is deeper now than that of 2008real estate Updated: Jan 14, 2017 19:40 IST
While there was a V shaped recovery (when markets dropped and recovered sharply) after 2009, a U shaped recovery (gradual recovery) is expected this time around, say realty experts. The Lehman crisis happened in September 2008 after which transactions in the real estate market came to a standstill.
“A V-shaped recovery began in 2009. Mortgage rates were brought down to around 8.25% in March 2009. In the first half of March 2009, a rate cut led to 18% growth in sales. There was another 50% growth in 2010. It was V-shaped recovery because the markets collapsed after September and returned with a bang boosted by a cut in mortgage rates,” says Rajeev Bairathi, executive director and head capital markets India, Knight Frank India.
Low mortgage rates this time will play a big role in the sector’s path to recovery – a U-turn recovery, he says. This is because the trough is deeper now than that of 2008. The slowdown in the market started way back in 2014 and continued into 2015 and 2016. It lasted for over two years before the demonetisation blow brought it to a sudden halt. This could last for a few more months.
Market recovery now will be more durable because the sector has endured prolonged pain for almost three years. The first asset class to lead the path of recovery will be affordable housing, says Bairathi.
Fiscal incentives on home purchase could go a long way in reviving demand and any move towards addressing this in the budget will give a huge boost to the real estate sector.