News: Realty Sales Regain Momentum After Post-Demonetisation Fall-09.05.2017

Realty sales regain momentum after post-demonetisation fall

Kailash Babar  |  ET Bureau  |  May 09, 2017, 15:00 IST

 Real estate sales momentum has started slowly improving across key markets after initial sharp fall witnessed post the government's demonetisation move. Both sales and launches showing healthy levels during the fourth quarter is seen as an indicator of the market steadily making effort to reach the pre-demonetisation point.

Residential sales across top nine markets rose 13% for the fourth quarter of 2016-17 and the surge in the volume was primarily driven by Mumbai, Pune and Bengaluru, which together accounted for 57% of total sales, said a PropTiger.com report.

Total residential sales increased to 51,700 units during the quarter from 43,500 units in the previous quarter, which was marked with demonetisation. The number of launches across these cities also rose 19%, the highest in the last eight quarters. Around 51,500 units were launched in the quarter as compared to 43,250 units during the preceding quarter ended December.

According to ratings agency Moody's Investors Service, sales volumes in India's real estate sector had decreased by around 40% year on year in the fourth quarter of 2016, while launches dropped by around 60% during the same period.

“Sentiment in the sector has since improved.Measures in the 2017 budget will support the affordable housing segment, while reductions in home loan rates since November 2016 will improve demand,“ Moody's said in March while highlighting the sector is recovering.

Post demonetisation, there were signs of extreme caution by buyers, and real estate developers refrained from announcing any new launches during this period. Although the market may not soon move closer to the levels seen almost three years ago since when it has been in a slumber, the improvement in sales numbers is robust, experts said.

“Market has shrugged off some of the effects of demonetisation and looks ready for a recovery that will be led by affordable housing owing to various incentives offered by the government. With home loan rates going down, affordability has relatively improved across markets,“ said Shishir Baijal, CMD, Knight Frank India.

While the Reserve Bank of India refrained from lowering repo rate in its recent policy meet, home loan interest rates have already eased more than 100 basis points over the last one year to around 8.6%, which is a six-year low and this is certainly prompting homebuyers to act.

The country's largest public sector lender, State Bank of India recently announced a further sharp 90 bps cut in home loan rate. The revised home loan rate is the lowest level since 2009, when it had announced a teaser rate structure. On Monday, the bank reduced home loan rates further between 10 to 25 basis points, a move that will force other lenders to reduce rates. According to Baijal, implementation of Real Estate Regulatory Act is expected to boost confidence of homebuyers, who have been in wait and watch mode for some time.

Shares of listed real estate companies have also been reflecting the change in business scenario led by lower mortgage rates, improving sales momentum and impending implementation of Real Estate Regulatory Act that that is expected to boost the performance of organised players.