Data from various agencies reveal no clear link between demonetisation and movement in real estate prices, dispelling the notion that that realty prices took a hit post-demonetisation.
“After demonetisation, the ticket sizes (total cost of properties) have remained the same. Even when demand dried up, there was no correction and cash was back in deals as soon as comfortable level of remonetisation was achieved,” regional head of a research agency said. “People still get a 5-10% discount if they make a heavy payment upfront. But that was always the case and is not an outcome of demonetisation.”
While government data on property price movement is tardy, research agencies and independent bodies have been mapping price movement across micro markets in cities and across the country year-over-year.
Residex, National Housing Bank’s (NHB) index on price movements in real estate, shows that prices have increased after demonetisation. The index measures the carpet area price across cities but it is based on a very small sample size.
Gera Report shows a marginal drop in prices after note ban. However, the report had shown a similar fall in prices 12-months prior to demonetisation. Research agency Knight Frank report shows no change in property prices in the 18-month period between January 2016 to June 2017. And, experts, said there are hardly any chances of prices coming down in the future either.
So, where does the problem lie. “The problem is that government officials are still demanding cash for giving clearances to projects,” the regional head said. And this is something even developers agree with. “You go to the registration offices to check the free exchange of cash,” a developer alleged.
Soon after demonetisation, implementation of the Real Estate Regulation Act (Rera) meant that developers sharply altered their launch plans. Number of new unit launches fell and the developers say walk-ins have reduced and conversion times have increased, supply has quickly adjusted to the fall in demand. The worst affected has been the low-income group segment (home prices less than Rs 25-30 lakh) as prices of housing units have increased in this “high-demand” segment, according to the available data. “Even though more builders are venturing into this segment, this is a low-margin and high-volume segment. There is hardly any scope for price corrections here,” a developer said.
The government has claimed that demonetisation has been quite instrumental in bringing the interest rates down. While this might be true to an extent as bank deposits did rise and loan rates did come down, available data show the benefits accruing to only a smaller section of the population. As against outstanding housing loan y-o-y growth of 18% last year till September 30, the growth this year has just been 12.8%, RBI data shows.