Mumbai: For real estate brokers across the country, the past few days have been tough.
“No deals are happening. We are sitting idle for the past one week,” said Avinash Mordani, who runs real estate agency Primelinks Realtors and Relocators at Khar in Mumbai. Mordani said queries have significantly gone down while many who were looking to buy are holding off, expecting prices will fall after the government withdrew high-value currency notes. Real estate is expected to be one of the worst-hit sectors because of the government’s demonetisation move as cash forms a major component in most transactions in the sector.
Many property advisers have predicted land and property prices, particularly that of luxury houses, could fall as much as 30% in the next three to six months. However, several developers and brokers said there is little room for any major price cuts due to rising input costs, and also given that property prices in key markets have remained stagnant due to a three-year slowdown in the real estate sector.
Some other developers said as banks are awash with money following demonetisation as customers deposited tonnes of cash, home loan rates may come down in the coming months, helping push property sales. “Sales have fallen by around 10% in the past 10 days. Meetings with customers have fallen significantly,” said Sunil Mishra, chief business officer, PropTiger.com, a News Corp-backed real estate portal. He said customers are in “wait and watch mode” and are eager to know if prices will fall in the short term.
However, Mishra said prices are unlikely to fall, especially in the primary market. In most cases, he said, developers will not be willing to cut prices as cost for development may increase. “A large component of unaccounted cash goes in paying labourers and small suppliers. Now, they will have to move white because of lesser cash or because of more scrutiny, etc. Hence, overall costs will only go up as they have to pay service tax on those components,” he said.
Getamber Anand, president of Confederation of Real Estate Developers Association of India (Credai), agreed, saying property prices are not likely to reduce sharply as predicted, as the sales drop would be a temporary one. “As liquidity in banks improve, banks will be compelled to lend aggressively. To do that, they will have to lower interest rates,” he said.