Demonetisation and real estate

Amidst all the chaos and uncertainty ensuing in India after the big demonetisation move undertaken by the Indian government, a ray of light for the Non Resident Indian (NRI) community lies in opportunities to invest in the Indian real estate market at lower prices, writes Abhijit Ghosh, India Desk Leader, PwC Singapore & Gaurav Tijoriwalla, Manager, PwC Singapore.

There has always been a trend for NRIs to invest in Indian luxury condominium apartments in the metropolitan cities of India, particularly such as Mumbai, Delhi, Bangalore and Chennai.

Given the recent demonetisation move, property rates have significantly dropped across various cities in India. Specifically, the luxury condominium range of property apartments has been badly hit given that one of the objectives of the current demonetisation move is to discourage all significant cash transactions.

Recent news from online property sale portal, Housebolo is showing that developers in Chennai (including some of the top developers) are reported to be cutting prices by up to Rs.20 lakhs on slow-moving projects. In other instances, developers are offering huge reduction of Rs.200-Rs.300 per sq feet.

Experts believe that we can soon expect a 10 per cent to 25 per cent discount in the luxury segment of residential condominiums and also in the upmarket areas such as Nungambakkam, RA Puram and MRC Nagar.

As per Housebolo, the above situation is also echoed in the other metropolitan cities of India; for instance in Delhi, experts forecast a drop in property prices of 25 per cent to 30 per cent whereas in Bangalore, the price reduction could be in the range of 30 per cent to 40 per cent.

As per recent news reported in two of the leading Indian newspapers, on average, the overall price reduction in the luxury segment can be estimated to be in the range of 25 per cent to 30 per cent.

Another interesting fact is that the volume of transactions involving property dealings have plunged significantly in the last month post announcement of the demonetisation program (Nov 8, 2016).

In Bangalore, property registrations have dropped to about 200 per day, compared to approximately 1,800 properties that used to be registered before demonetisation took effect, according to Housebolo.

In Mumbai, it is expected to result in a 50 per cent to 70 per cent slow down or may even go to a no transaction period.

Even property enquiry portals have witnessed a significant dip – compared to the erstwhile number of 1500-1700 people per day, the same has plunged to about 400 people per day.

It seems that the overall market sentiment at this juncture is to wait and watch and make the right move at the right time.

There is no denying that the NRI community will be taking advantage of the situation and explore to invest in luxury condominium residential apartments in India. fii-news.com