Why demonetisation is good for Indian property market

Dubai - 63% in Sumansa Exhibitions survey say they are interested in buying property

The Indian real estate market is unlikely to get any major impact from the government's demonetisation move and is expected to become steadier and healthier in times to come, an industry expert says.
"With the Rera bill and the Benami Transaction Act and now demonetisation, the trust on the organised Indian property sector investment is high. People are not curtailed by insecurities of unsafe transactions," R. Srividya, general manager for corporate sales and brand engagement for the Indian Property Show at Sumansa Exhibitions, told Khaleej Times.
Elaborating, she said the Indian real estate sector comprises of two segments - the primary market and the secondary market. With the Rera bill and other corrective measures adopted by the government, the primary sector largely operates through the banking channels with mortgage component and therefore the impact on this segment would not be very high.
However, she said unorganised builders and the secondary market will be adversely affected by demonetisation since cash transactions can no longer be carried out as before and there is no alternate in sight in the near future.
To a question, she said NRIs will be more inclined to buy now since the majority of the transactions happen through cheque payments.
Referring to a recent survey conducted amongst NRIs by Sumansa Exhibitions, she said the study shows a positive feedback showing a sharp increase in their appetite for premium and luxury projects. About 63 per cent of the survey participants showed interest in buying properties in India during the next six months compared to 61 per cent last year.
"With many builders already adopting a 100 per cent transparent policy-and-cheque payments, the trust factor has been high. Builders who have adopted this policy have seen a surge in sales and are optimistic about future sales," Srividya said.
Around 47,000 residential units were sold across the top nine cities of India in financial year 2016 and these accounted for 17 per cent of total sales.
In reply to a question how demonetisation will impact interest rates and benefits the buyers, she said due to demonetisation, a large amount of cash in circulation will be brought within the purview of the formal banking system and increase liquidity with the banks.
"This would lead to lower dependence of banks on high-cost borrowings. Higher deposit growth and continuing weak credit growth would create opportunities for lending rate cuts and investment activities to pick-up especially in the mortgage driven real estate sector," she said.
About long- and short-term prospects of real estate, she said this past year has seen a lot of potentially long-lasting changes in the real estate sector.
"While the short-term outlook does look bleak, the impact would be felt by the unorganised sector and secondary sales market only with the primary market relatively sailing through. For credible and reputed developers in the top eight Indian cities its business as usual."
"A few projects in tier two or three cities where cash has played a role in transactions even in primary residential sales may be impacted. However, the turmoil in this segment will settle down in a short period of time and much depends on their willingness to adapt to this change." For those developers and investors who have conducted or are looking to conduct their dealings transparently and legally have no reason to panic, she said. "It will essentially be business as usual for them."
 
Indian property show
Sridivya was confident that business will be as usual at the forthcoming Indian Property Show this week despite the currency crisis in the country.
"With reputed and credible builders on board who have transparent policies, we are certain that it would be business as usual for them," Srividya said.
She was of the view that the legislation has now strengthened to protect the buyers and the real estate market is expected to become more steady and healthier in times to come. "Therefore, the expectation from the show has changed for better."
Over 100-plus builders from across India will be displaying thousands of properties and hundreds of projects over the three days of Indian Property Show, starting on Thursday. Adani Estates, Godrej, Embassy Group, Mantri Developers, Brigade, Sobha, Paradise Superstructures, TRIF Kochi, Isha Homes, and Ozone Group are some of the well-known names who will be participating in the exhibition.
"This edition also features renowned developers from across India with a wide range on offer, displaying projects ranging from affordable housing, gated communities, to luxury homes. The properties on display is at par with the advancing expectation of investors and the latest trend in properties such as eco-friendly housing, water recycling units, waste segregation etc," Sridivdya concluded.
- muzaffarrizvi@khaleejtimes.com

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