Indian realty gets over demonetisation jitters

Developers starting to see enough happening to get their sales initiatives into gear

India’s property market is finally shedding its postdemonetisation-induced fears. Developers are starting to see enough happen on the selling side in recent weeks to get their sales and marketing initiatives into gear. But as far as new launches go, they are still taking it easy.

“Even though prices remained stable in most large markets, sales velocity did come down quite a bit in November,” said Vikram Chari, Chairman and CEO of Smart Owner, an online real estate marketplace.

“Since then, sales velocity has been rising gradually … but still below its long-term trend. The decreased sales velocity is likely the result of a few buyers waiting to see whether prices decline. However, I believe they are making a mistake because fundamentals actually suggest prices will go up in most major markets as a result of demonetisation.”

But it has taken a full four months before buyers started to inch their way back into the market. “The higher-end sector is experiencing some Property market sentiments in South Indian cities seem better placed.

One of India’s southern metropolises, Bengaluru, is placed right in the vanguard of the turnaround story. “It has low current prices, rapid population growth, and high growth in white-collar jobs,” said Vikram Chari of Smart Owner. “It is not just the number one commercial property market in India but is also the country’s leader in office space absorption. The vacancy rate for office space in Bengaluru is only 3 per cent.”

Hyderabad is rated as “another interesting market — It witnessed a steep downturn due to the controversy over the state capital but has recently been recovering very strongly,” said Chari. “Pune and Chennai are interesting, although not yet to the same extent that Bengaluru is.” weakness,” said Chari. “This is because while middleclass buyers have been paying mostly by cheque and bank loans, those purchasing highend properties are more likely to use cash.”

Developers with high-end projects have been making a concerted push to generate interest among non-resident Indians in the UAE and the Gulf. Where they are not making pitches to select potential buyers, they are doing so through property exhibitions.

Artech, based in the southern state of Kerala, is trying to generate traction for what is billed as the costliest apartments in the state. Units at its “Diamond Enclave” in Thiruvananthapuram — the capital — range from Rs35 million to Rs70 million (Dh3.9 million). “Post-demonetisation there was a definite dip in the demand for luxury. But the last quarter of the 2016 financial year, demand has picked up and new inquires are coming in,” said T.S. Asok, Managing Director of Artech Realtors.

In a recent commentary, JLL India’s CEO and country head, Ramesh Nair, noted: “Guidance from RBI (Reserve Bank of India) forecaster surveys and other market analysts suggests that inflation will remain rangebound at 4-6 per cent. In the near term, the environment is conducive for housing demand to revive.”

According to M.P. Ahmad, Chairman of Malabar Group, “It may take time ... but demonetisation will definitely push real estate activity into the organised sector. That means less reliance on illegally sourced/generated funds and where all transactions get proper registration.”