NEW DELHI: Likely removal of the cash element from property deals following the government’s ban on high denomination notes is set to have a huge bearing on the residential segment, as the total market valuation is expected to see erosion of 30% or Rs 8 lakh crore in the near term. Residential property valuation in the top 42 Indian cities, both sold and unsold, is expected to fall to Rs 31,52,170 crore in the next 6-12 months from current Rs 39,55,044 crore, according to a PropEquity report.
Mumbai is expected to register the maximum fall in market valuation owing to the high weighted average price of Rs 18,108 per sq ft, of Rs 2 lakh crore, followed by Bengaluru by Rs 99,983 crore and Gurgaon by Rs 79,059. “We expect lot of secondary market transactions (resale) coming down in volume. For every five buyers out there, there is only one buyer willing to pay all-cheque. And usually, people want to take at least 20-30% of the amount in cash, but this will now go away for the time being,” said Samir Jasuja, CEO, PropEquity.
Jasuja believes, people now are increasingly trying to convert their unaccounted money into real estate. “This will also mean that we can expect more formal and organized developers to weather this storm and will relatively be in a better position in the next 9-12 months,” he added.
Builders with significant exposure to commercial realty, especially grade A development, would be relatively less impacted as they will focus on commercial and office space in this period, according to the report.
Branded developers, with asset light business models and primarily into joint development with their partners, who are the landowners, will be able to sustain the tide, it added. The government earlier this month banned the use of Rs 500 and Rs 1,000 notes, in a bid to clamp down on black money. Residential real estate being a hot-bed for black money, with many developers, resellers and home buyers insisting on having hard cash as a component of payment, is set to witness a major blow, with prices expected to go down in certain pockets of the country by 20-30%.
Land purchases, which often involved a significant portion of black money, is also expected to stop, taking the prices down gradually.
Credits ET Realty