Demonetisation impact: Housing sales down 44% in Oct-Dec 2016

New Delhi: Housing market came to a “complete standstill” during October-December 2016 on adverse impact of demonetisation as sales fell by 44 per cent in the eight top cities, lowest level since 2010, resulting in Rs 22,600 crore revenue loss to the builders, according to Knight Frank.

The property consultant has pegged the state government’s notional loss on stamp duty at Rs 1,200 crore.

Housing sales in residential segment fell to 40,936 units in eight major cities during October-December 2016 from 72,933 units in the year-ago period and 68,734 units in the previous quarter, according to a report released by Knight Frank India.

New home launches fell by 61 per cent to 24,316 units in the fourth quarter of 2016 compared with the year-ago period.

The Delhi-NCR market was hit hardest with sales volume dropping by 53 per cent to 6,765 units in the fourth quarter of 2016 while new launches falling by a massive 73 per cent.

Knight Frank tracks the primary housing markets of eight cities — Delhi-NCR, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad.

Housing sales went up in the first nine months of 2016, but the government’s decision to scrap the Rs 500 and Rs 1,000 notes in early November pulled down the housing sales in the fourth quarter as well as for the entire last year, it added.

“…The Indian government’s demonetisation move on November 8 brought the market to a complete standstill. Against this backdrop, developers refrained from announcing any new launches and buyers turned extremely cautious before committing on purchases,” the report said.

All eight cities witnessed a crash, including the usually resilient Bengaluru, during the fourth quarter of 2016 and as a result housing sales fell by 9 per cent at 2,44,686 units in the full year 2016 from 2,67,957 units during 2015.

“The residential market of the top eight cities in India started off on a positive note in 2016 with H1 witnessing a 7 per cent jump in sales volume compared to H1 2015. H2 2016 also began at the same pace with Q3 2016 sales volume showing a positive growth on the back of the start of the festive season,” Knight Frank India CMD Shishir Baijal said.

However, he said the demonetisation move pulled down the last quarter sales across all cities.

“The fall in Q4 was intense, H2 2016 ended below H2 2015. 2016 ends at launches and sales being lowest since global financial crisis,” Baijal said.

On the outlook, he said the uncertainty is likely to continue in the next quarter.

“In the last two months, there has been an adverse impact on the residential market because of demonetisation. Sales came to a standstill in the eight major cities,” Knight Frank India Executive Director and Head Capital Markets Rajeev Bairathi told reporters here.

Asked about the impact of notes ban on secondary (resale) market, he said there were hardly any transactions.
On the outlook, Baijal said that lower home loan interest

rate, RERA & GST, likely fiscal benefits for taxpayers in Union Budget, enforcement of Benami Transactions (Prohibition) Amendment Act and remonetisation are likely to infuse the ‘feel good factor’ during this year.

“It will be important to see how developers recalibrate their businesses to the changing environment and, whether buyers capitalise the opportunity of various reforms and change their status quo position of ‘wait and watch,” he said.

On NCR market, Bairathi said: “The NCR residential market has been under pressure and 2016 was no different. The market has been in a downward slide, since 2010, with every passing year hitting a new low.”

“In H2 2016, the market witnessed de-growth in demand and supply by 29 per cent and 73 per cent, respectively, compared to the same period in 2015. Piling up inventory, lack of consumer confidence due to litigations and infrastructure delays are some of the major factors that have decelerated new launches in NCR,” he said.

These factors coupled with partial implementation of RERA in H1 2016 set the sluggish market in a twirl again as new launches came to a standstill and developers rushed to complete pending projects.

The market did start giving indications of marginal recovery in Q3 2016 owing to developments like project deliveries, reduction in prices and improving infrastructure in places like Noida Extension and Noida-Greater Noida Expressway, the consultant said.

“However, the demonetisation move dealt a huge blow to the NCR realty market and the Q4 2016 numbers are a testament to this. As the sales number for the first nine months had shown an optimistic trend, we believe that 2016 would have been at par with 2015 had it not been for the demonetisation move,” Bairathi said.