Real estate was identified as one of the biggest sectors that would be hit as a result of note ban (demonetisation) and the forecast seems to have more than come true. The Real Estate Sentiment Index dropped below 50 and in the process, hit a three-year low during the December 2016 quarter marking it the worst quarter since the global financial crisis, according to a report that also said the situation augured well for home buyers.
Read: India property prices may rise as developers heap compliance cost burden on buyers
Property consultancy Knight Frank and industry body Ficci, releasing the Real Estate Sentiment Index for the quarter, said, "A score of 50 represents a neutral view; a score above 50 demonstrates a positive outlook; and a score below 50 indicates negative sentiment."
The residential property segment took a severe hit after the note ban came into immediate effect from the midnight of November 8, 2016.
"The impact of which can be gauged from the fact that the total residential sales of the top eight cities fell by 40% during Q4 2016 compared to Q3 2016. The fall was so intense that 2016 replaced 2015 as the worst performing year since the gobal financial crisis," the report observed.
"The demonetisation move did infuse a high degree of uncertainty and confusion in the market but this impact seems to be transient in nature and the mid-to-long term impact is expected to be positive," Samantak Das, Chief Economist & National Director at Research, Knight Frank India, said.
The commercial real estate escaped the demonetisation decision, on expected lines. "No significant impact of demonetisation was evident on the office markets of the top Indian cities."
The report said that the industry is poised to rebound in the current quarter (January to March 2017), reflecting high optimism. "The Union budget's focus on making home purchases affordable and the probable implementation of RERA have been welcomed by the respondents. The future sentiment score of 62 is a good indicator of the robust optimism portended by the stakeholders for the real estate sector in the coming six months."
Good news for buyers
On the positive side, stable prices provide an opportunity for home buyers.
"In the next six months majority of the respondents, to the tune of 45 percent, expect prices to remain stagnant. On the other hand 26 percent of the respondents expect a downward pressure on price appreciation, during the same period," the report said.
Share prices of real estate companies ended with minor gains or losses on Thursday on the BSE even as the benchmark index Sensex closed 28 points higher at 28,893. Reliance Industries closed 1.80 percent lower at Rs 1,186.
Sobha Developers closed at Rs 288, Oberoi Realty at Rs 325, DLF at Rs 149, HDIL at Rs 68 and Puravanakara at Rs 50.
