Demonetisation impact: Housing sales down 41% in October-December 20162 min read . Updated: 10 Jan 2017, 11:03 PM IST
Home sales in the October-December period fell 41% from a year ago to 40,936 units across eight major cities, while launches fell an even sharper 61% to 24,316 units
Mumbai: Demonetisation was expected to hurt property sales the most. And it did.
Home sales in the October-December period fell 41% from a year ago to 40,936 units across eight major cities, while launches fell an even sharper 61% to 24,316 units, property consultant firm Knight Frank said in its half yearly report. The sharp fall makes 2016 the worst in terms of sales and launches ever since the global financial crisis of 2008.
On 8 November, the government withdrew high-value bank notes as part of its effort to curb black money, terror finance and counterfeit notes, triggering a severe cash crunch. The move created panic in the real estate sector which sees heavy cash transactions. Many home buyers delayed purchases, expecting prices to fall.
“All eight cities witnessed a crash in Q4 2016, including the usually resilient Bengaluru. 2016 replaces 2015 as the worst performing year in terms of sales volume in the recent history," the report said.
In the second half of 2016, sales volume and new launches fell by 23% and 46% respectively. For the full year, sales volume dropped by 9% to 244,680 units.
Bengaluru registered a fall for the first time since its peak in 2013, with new launches and sales for the year 2016 declining by 17% and 7% respectively. The National Capital Region was the worst-hit, witnessing a decline in demand and supply by 29% and 73% respectively.
The report also pointed out that Mumbai Metropolitan Region (MMR) has lost its recovery mode, with launches and sales falling by 53% and 26% respectively.
“Demonetisation move pulled down the last quarter sales across all cities. The fall in Q4 was intense, H2 2016 ended below H2 2015. 2016 ends at launches and sales being lowest since global financial crisis," said Shishir Baijal, chairman & managing director, Knight Frank India in the report.
He said uncertainty is likely to continue in the next quarter, adding it will be important to see how developers recalibrate their businesses to the changing environment and, whether buyers capitalise on the opportunity of various reforms and change their status quo position of ‘wait and watch’.
The office market saw steady demand in the top six cities in the second half of 2016 in the top six cities. However, transactions fell by 12% to 20.4 million sq. ft, with Mumbai and Pune showing the sharpest decline mainly due to supply crunch.
New supply fell by 46% in second half of 2016 to 10.1 million sq ft in the six cities. During the period, average rentals jumped rose the highest since 2013 at 11% led by Mumbai, followed by NCR and Bengaluru.
As per the report, vacancy level has fallen to a nine-year low, while information technology (IT) and IT enabled services continue to drive major office absorption in the country.
Baijal said in spite of a strong demand from occupiers, transaction volume is facing a challenge across all cities due to supply crunch. Not much new supply is on the anvil in 2017 and rentals will be on a continuous rise, he added.
“In 2017, we also look forward to the first listing of REITs that will bring in depth in the funding of commercial real estate sector. However, it will be important to take note of President-elect Trump’s policy and outcome of Brexit that are likely to decide the growth trajectory of the office market," he said.