Real estate and Demonisation
The real estate industry in India was badly hit by the drop in sales in the last quarter of 2016 following demonetisation. Excerpts from a report by Knight Frank
Market buoyant in Jan-Jun '16
With sales looking up in the first half of 2016 and the third quarter beginning on a positive note, the expectation was sales would increase by 4% in the second half.
Figures are number of units sold across Mumbai, NCR, Pune, Bengaluru, Chennai, Hyderabad, Kolkata and Ahmedabad
Sales fell sharply in Oct-Dec
Demonetisation pulled down last quarter sales across all cities. Despite one third of the fourth quarter being the festive season, sales fell by 40%.
The recovery predicted for the second half of the year did not materialise.
Launches were put off for later
The launch rate stumbled by as much as 45% over the previous quarter.
Oct-Dec 2016 could not maintain the launch run rate of the previous three quarters.
Both industry and the government lost money
Revenue loss in the fourth quarter hit both the state exchequer and the real estate industry.
Average # units sold in Q4 2014 & Q4 2015: 73,769
# Units sold in Q4 2016: 40,936
45% Fall in sales
State government notional Loss on stamp duty Rs 1,200 cr
Notional Revenue los to real estate industry Rs 22,600 cr
Year-on-year figures tumbled
The fall in sales was so bad that the numbers for the second half of 2016 were below that of the second half of 2015
NCR was the worst hit, followed by Bengaluru and Mumbai. Hyderabad was least impacted.
Urgent steps required
The things that can infuse the feel good factor back into the sector and pave the way for a revival are:
*Lower home loan interest rates
*RERA & GST
*Remonetisation
*Likely breaks for taxpayers in the upcoming Budget
*Benami Transactions (Prohibition) Amendment Act, 2016
The “feel good factor” is extremely important for the revival of the industry. The affordable segment is expected to bounce back first.
Office spaces in poor supply
The second half of 2016 witnessed a fall in office space completion. There was a supply crunch in the face of strong demand.
Half yearly trend of new completions and transactions show demand but supply crunch.
Vacancy levels fell to 9-yr low
Pune and Bengaluru witnessed single digit vacancies, after peak of 2012
Relevant vacancy is below 5%
Rents continued to rise
Rentals were not affected, with the biggest growth in NCR and Mumbai
As supply is unlikely to improve, rentals will continue to rise.
Market buoyant in Jan-Jun '16
With sales looking up in the first half of 2016 and the third quarter beginning on a positive note, the expectation was sales would increase by 4% in the second half.
Figures are number of units sold across Mumbai, NCR, Pune, Bengaluru, Chennai, Hyderabad, Kolkata and Ahmedabad
Sales fell sharply in Oct-Dec
Demonetisation pulled down last quarter sales across all cities. Despite one third of the fourth quarter being the festive season, sales fell by 40%.
The recovery predicted for the second half of the year did not materialise.
Launches were put off for later
The launch rate stumbled by as much as 45% over the previous quarter.
Oct-Dec 2016 could not maintain the launch run rate of the previous three quarters.
Both industry and the government lost money
Revenue loss in the fourth quarter hit both the state exchequer and the real estate industry.
Average # units sold in Q4 2014 & Q4 2015: 73,769
# Units sold in Q4 2016: 40,936
45% Fall in sales
State government notional Loss on stamp duty Rs 1,200 cr
Notional Revenue los to real estate industry Rs 22,600 cr
Year-on-year figures tumbled
The fall in sales was so bad that the numbers for the second half of 2016 were below that of the second half of 2015
NCR was the worst hit, followed by Bengaluru and Mumbai. Hyderabad was least impacted.
Urgent steps required
The things that can infuse the feel good factor back into the sector and pave the way for a revival are:
*Lower home loan interest rates
*RERA & GST
*Remonetisation
*Likely breaks for taxpayers in the upcoming Budget
*Benami Transactions (Prohibition) Amendment Act, 2016
The “feel good factor” is extremely important for the revival of the industry. The affordable segment is expected to bounce back first.
Office spaces in poor supply
The second half of 2016 witnessed a fall in office space completion. There was a supply crunch in the face of strong demand.
Half yearly trend of new completions and transactions show demand but supply crunch.
Vacancy levels fell to 9-yr low
Pune and Bengaluru witnessed single digit vacancies, after peak of 2012
Relevant vacancy is below 5%
Rents continued to rise
Rentals were not affected, with the biggest growth in NCR and Mumbai
As supply is unlikely to improve, rentals will continue to rise.
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