25% dip in luxury property prices likely after demonetisation

The demonetisation move is likely to hit luxury properties. Prices are likely to dip by as much as 25% to 30% as sellers struggle to offload properties

The demonetisation move is likely to hit luxury properties. Prices are likely to dip by as much as 25% to 30% as sellers struggle to offload properties to generate liquidity, says real estate consultancy JLL India.

Luxury properties likely to see prices correct by 25% following demonetisation move. (Getty Images/iStockphoto)

With black money suddenly being wiped out of the market, a lot of investors who have been investing in projects with unaccounted-for money - and raising prices to book profits - will be eliminated from the system, thereby aiding a much-needed correction.

The luxury and high-end segments of residential real estate will be affected, since most transactions for this segment are done in cash. The legal banking/financing channels have accounted for only a small part of all sales in this space, says Ashwinder Raj Singh, CEO - residential services, JLL India.

The realty sector has traditionally seen a high involvement of black money and cash transactions. However, almost all such incidences have been in the secondary sales market, where cash components have traditionally been a veritable ‘must’. This means the resale property segment is likely to take a big hit. However, short-term pain is inevitable when any eventual long-term cure for a disease is sought. There has for long been a strident demand to bring transparency in the sector to make it more organised, and cash dealings must necessarily be the first symptom of the disease to be dealt with, the report says.

The demonetisation exercise was a very necessary step which was bound to bring with it a tremendous shake-up wherever black money has played a major role. Over the long term, the Indian real estate sector will emerge stronger, healthier and capable of long periods of sustained growth, says the consultancy.