Property buyers may find good bargains

But end-users should become more wary of buying from smaller developers

The government’s move to curb black money by removing old ~500 and ~1,000 notes from circulation is expected to have a negative impact on prices in the real estate sector, and many potential buyers may find good bargains in the secondary market.

In the primary market, the level of correction may not be high. “This market, which is driven by large developers, is unlikely to get affected that much as most large and reputed developers already do not deal in cash,” says Anshul Jain, managing director, India, Cushman and Wakefield. Smaller, unlisted developers may face liquidity concerns. “The liquidity stress is likely to result in delays in construction in the short to medium term,” warns Anshuman Magazine, chairman, India and South East Asia, CBRE. End-users should, therefore, become more wary of buying from smaller developers.

For buyers hunting for a bargain, the secondary market may throw up attractive opportunities. “I expect higher price correction in the secondary market where individual sellers, who experience difficulties, will be forced to bail out. Also, if buyers pay taxes on their income, their ability to pay the premium between the registration price and the market price will decline, so they will bargain harder,” says Anurag Jhanwar, business head-consulting and data insights, PropTiger.com.

Next, let us look at the expected impact of the government's measures on a few key markets. In Gurgaon, the market has become more end-user driven in the recent past. “Fewer investors, who park black money in real estate, have been doing so because the market has been stagnant for the past two-and-a-half years, and may not appreciate in the near future,” says Sanjay Sharma, managing director, Qubrex Realty. He expects a price correction of 5-10 per cent in the primary market, mostly in projects of smaller builders. In the secondary market, he expects prices to correct by10-15 per cent over the next six months. Prices have already corrected in the recent past: On Sohna Road, projects that used to sell for ~9,200 per sq ft are now available for ~8,000, a decline of around 13 per cent over the past couple of years. In Greater Noida West, prices range from ~2,800-3,500 per sq ft and have been largely stagnant over the past year. “I expect bigticket projects to be affected more by the government's antiblack money measures,” says Pradeep Mishra of Sainik Estates, a real estate consultancy.

Bengaluru's market, which is primarily end-user driven, may also not escape the impact of curbs on black money. “The primary market has been bleeding for some time due to oversupply. The secondary market may see a correction of 10 per cent or more. Investors are sitting on gains there, which offers scope for negotiation,” says Sajid, manager, Silverline Realty.

In Hyderabad, prices have not yet reached speculative levels: They are still in the ~3,000-6,000 range in Hi-Tech City area, for instance. “Developers don't engage in cash deals with landowners but give a part of the built-up area to them in return. The market is driven largely by the IT crowd. Infrastructure is sound in areas where development is taking place, and demand exceeds supply. Developers are also operating on thin margins. So we don't expect too much correction here,” says C Shekhar Reddy, former national president, Credai.

Finally, plot prices may see a sharp correction as cash dominates in this segment.