Real estate takes a hammering but experts say stability coming

NEW DELHI: The real estate sector that has been accused of hitching its fortunes to illicit funds suffered a body blow after the government scrapped high-value banknotes in a blitz against black money and corruption.

Realty stocks ended 17.5% lower on Wednesday while property prices, according to conservative estimates, slumped about 25% in Delhi and Gurgaon after 500- and 1,000-rupee notes were pulled out of circulation. Some estimates put the price crash at 40%.

In south Delhi’s Chattarpur, resale price of farmhouses fell from `20 crore an acre on Tuesday to `15 crore overnight. Likewise in Gurgaon, negotiations for a resale property in DLF Phase 1 fell from `1.45 crore to `90 lakh.

Experts said the fall in prices is short-term and will stabilise soon, bringing transparency to the sector and ending dubious cash transactions.

“In the long run, the move is likely to prove structurally positive for the real estate sector,” said Anshuman Magazine of real estate services firm CBRE.

Union urban development and housing minister Venkaiah Naidu held out hope to homebuyers.

“The decision will give huge relief to homebuyers. The inflated price of land will come down and make housing affordable for a large section of society.” CONTINUED ON PAGE 6 GOLD RATES SPIKE >> P9