Property deals in a stuck state

NEW DELHI: It’s not a good time to be in real estate. As people got over the initial shock of the government’s move to make Rs 500 and Rs 1,000 notes redundant, those involved in the realty business were coming to terms with a bleak future a day after. While Crisil, a global ratings company, predicted a slowdown in the sector, with land prices set to fall, local brokers were counting the number of deals or transactions that are now stuck.

 The biggest impact, say brokers, is likely to be on property transactions in the city. “These are high-value deals, with a large black component, especially as the circle rates are not reflective of the market rates,” said Deepak Sapru, a realtor in Delhi. The reason is the price of properties in areas like Friend’s Colony, Defence Colony and Lajpat Nagar, which get sold in crores, with only a fraction being paid on paper. Brokers revealed that several transactions, which are likely to be hit, had been stopped. “Everybody is waiting to see what happens next. No one is sure how to pay the black component now,” added Sapru.
The situation is bad in the rest of NCR as well. Said M M Reza of Silver Brick Realty Pvt Ltd, a local brokerage company in Noida, “The residential segment has been sluggish with most investors moving out of the market in the past year. The black component had been very small though as circle rates were high in Noida at least.”
 According to Reza, despite the prevalence of “white” deals, the black money was still present, which will now be impacted. “The residential segment will see a correction of at least 10%, which is massive in the realty sector,” admitted Reza. For commercial properties, this will be even higher, he claimed. “The first to be hit will be the projects with assured profits. These mostly run on cash, so they will be impacted badly,” he added.

Crisil, in an analysis on Wednesday, forecast a rough future for the real estate market. It’s report showed a “highly negative” impact on the sector, predicting that NCR, with high investor demand would be “severely impacted” while land prices are likely to fall. It also forecast that the residential real estate demand would decline, especially in markets with unorganised developers where the practice of cash transactions was prevalent.

Credits Times of India

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