News: Demonetisation disrupts Gurgaon housing market, brings sales & launches to a standstill-08.01.2017
Demonetisation disrupts Gurgaon housing market, brings sales & launches to a standstill
NEW DELHI: The residential real estate market in Gurgaon, already in the doldrums, has ground to a near halt in the wake of demonetisation, experts said. While launches have been put on hold, buyers have been able to drive a hard bargain in the few deals that are taking place, with discounts of 8% or so, they said.
Since the demonetisation announcement on November 8, sales slumped by as much as 90% from the same period last year, experts estimated. While prices are expected to decline further in the months ahead, some developers believe the situation will stabilise by the end of the June quarter, if not earlier.
That demonetisation would have a big impact wasn’t a surprise since cash forms a major component of most transactions, particularly in the secondary market. A significant proportion of unaccounted wealth has traditionally found its way into real estate, which the government aims to do away with.
The sector has also been hit by economic disruption caused by the note withdrawal, with the uncertainty compounded by frequent rule changes. “Many airy statements after demonetisation on price cuts have caused a sense of confusion and propagated a wait-and-watch policy for many buyers,” said Rohan Sharma, associate director, research and real estate intelligence service, JLL India.
IMPACT ON SALES Sales of new homes in areas such as Golf Course Road, Golf Course Extension, New Gurgaon (Sector 74-92), Sohna and Dwarka Expressway have dropped by 90% or so, said Arjun Puri of Puri Constructions. Gurgaon witnessed a decline of more than 30% in new home sales to 278 units in November from 410 in October, according to PropEquity. The year-on-year drop in November was over 50%.
The year-on-year fall in new home sales in Gurgaon in the December quarter is estimated at 60%, according to a property consultant who didn’t want to be identified. “This would be more than the National Capital Region average of about 50%,” he said, adding that Noida has been surprisingly more resilient, with sales dropping 41% in the December quarter.
Gurgaon had an unsold inventory of 33,262 units at the end of November. In the September quarter, Gurgaon witnessed the lowest home sales in 11 quarters at 1,277 units, according to PropEquity.
“Post demonetisation, secondary market transactions (resales) have come almost to a standstill over the last one month in volume,” said Samir Jasuja, CEO, PropEquity.
IMPACT ON LAUNCHES As for the primary market, there have been no project launches since demonetisation in Gurgaon. The new apartment supply this year till September was over 70% down, against the corresponding first three quarters of 2015, according to JLL. Some are optimistic that the market may revive in the New Year.
Navin Raheja, chairman of Raheja Developers, said, “Launches are on hold at present, but will start after some clarity in January.”
Sharma of JLL India feels the implementation of the Real Estate Re gulatory Act (RERA) in Gurgaon may also lead to shortterm supply constraints. “Developers are looking to recalibrate their operations to become RERA-compliant,” he said. The slump will persist for the first two quarters of 2017 in Gurgaon with a possible revival in the latter half of the year, according to Samantak Das, chief economist at Knight Frank.
“While consumers are expecting a price cut, lowering of interest rates, some fiscal incentives in the budget and introduction of the Real Estate Regulatory Act will be major triggers for this market to revive,” Das said.
Those who have legitimate income and are ready to take the plunge can drive a hard bargain. “Home buyers are able to get discounts after aggressive negotiations in today’s times by up to 8%.
People ready to pay in white through cheques have a good chance to negotiate,” said Ashwin Chawwla, a Gurgaon-based broker and founder of BigDeals.in.
Many experts predict that land and home prices, particularly in the premium and luxury segments that form a major chunk of the Gurgaon housing market, could fall as much as 30% in the next three to six months. But developers and brokers said there is little room for any major price cuts.
Developers believe prices could drop in stressed sections of the secondary or resale market, which is populated by short-term speculators looking to make quick returns, but the primary or new home market is unlikely to suffer any anticipated price fall.
Average new home prices dropped about 7% to `6,326 per square foot in November from `6,829 per sq ft in the same month last year, PropEquity said.
