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    Infra Talk: Demonetisation and its impact last year

    It is time to tame the wild rumours and the angst about the impact of demonetisation on real estate in 2016

    Infra Talk: Demonetisation and its impact last year
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    Fact File

    Chennai

    The Indian real estate sector has been facing significant challenges in the past few years when it comes to sales and overall growth. With a lot of measures, the sector was clearly pointing towards a slow and gradual, but sure recovery. Pre-demonetisation, this is how the scenario was: 

    Sales and prices: 

    After stagnating or even declining sales for past couple of years, the 1st half of the year saw some upward movement on the back of many positive factors.. It was not only investors but also end-users who started coming back in the market. 

    Unsold inventory: 

    Except for a few pockets in Delhi-NCR, most of the prominent real estate markets saw a gradual decline in the unsold inventories. To liquidate their holdings and ensure financial stability, developers became amenable to negotiating more and offering attractive deals. They also tied up with financial institutions to offer affordable loans, and announced other schemes to help buyers take decisions. 

    New launches: 

    New launches reduced markedly in the current FY 2016-17, owing to higher unsold inventory. Also, catering to the demand of affordable housing, new launches started focusing on that segment.

    POST-DEMONETISATION: 

    Demonetisation brought a lot of confusion, uncertainty— and, most of all, rumour-mongering—especially when it came to the realty sector. To get a clear picture, let us examine how demonetisation affected the residential market. 

    Secondary market: 

    This market definitely got affected, considering the structure of the deals involved often take here. With scarcity of cash, a large corpus of buyers went off the market and sellers can do little but wait. This will also result in the reduction of prices, thereby benefitting buyers. 

    Primary market:

    The rumoured decline in this segment is very far from reality, because the primary market  caters to end-users whose primary sources of funding are banks and other financial institutions. Simply put, it is home loans which finance the purchase of such properties, so this segment is effectively insulated.

    - The writer is CEO – Residential Services, JLL India

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