Demonetisation hits Pune real estate market

PUNE: The sales in the real estate sector plunged by over a third and new launches came down by 64% in the three month period from October to December 2016 compared with the same period a year ago.

A study of real estate consultancy firm Knight Frankrevealed the drop in transactions post-demonetisation. Knight Frank had predicted in July 2016 that the second-half of the year would see the Pune real estate market bouncing back. And that was exactly what was happening until demonetisation struck the market. Suddenly , all cash transactions dried up and the real estate sales dropped.

While real estate prices have not corrected officially, some buyers are getting onthe-spot discounts of 10-15%. Also, certain micro markets have seen some correction.

A Gera report showed that officially real estate prices corrected by an average of just 1.69% in the last six months of 2016, following a correction of about 2.2% in the first-half of 2016. This price correction estimate by Gera takes into account newly launched projects that are also smaller in size and are launched mostly on the outskirts of the city.

The Knight Frank data is in line with property registration collections at the state registration offices, as reported by ToI earlier.

In the three months ended December 2016, Knight Frank study shows that the sales in the region controlled by the Pune Metropolitan Regulatory Development Authority (defined by the company as areas comprising municipal limits of Pune, PimpriChinchwad and areas in the 8-10km vicinity) saw sales of only 6,300 units against 9,748 in the same period of 2015.This was the lowest sales achieved in the market since 2010.

With the impending Real Estate Regulatory Act (RERA) implementation, developers have started to temper their launches. This was seen in the last quarter data by Knight Frank, where only 3,400 units were launched in the region against 9,430 in the same period of the previous year.

“The demand is falling, but the supply is falling faster, and so there is unlikely to be any significant price movement. For prices to correct, the demand has to be very less over the next four quarters, which is unlikely,” said Shantanu Mazumder, the regional director of Knight Frank’s Pune Branch.Depending on the geographical area and estimates, the total unsold inventory in Pune is in the range of 49,720 units (city limits, Knight Frank report) to 1,04,452 units (district-wide, Gera report). This translates to somewhere between 5-6 quarters of inventory – a number which experts say is “healthy” and does not compel builders to bring down the cost.

The Knight Frank study estimates that lower sales in the third quarter despite it being a festive season has re sulted in a “notional” loss of Rs2,000 crore to the real estate industry (each unsold flat valued at about Rs58 lakh).This translates into a loss of Rs100 crore to the state government in terms of loss due to stamp duty collection.

The extent to which it will have a bearing on jobs in the construction sector is yet to be estimated, credibly. The sector is the second largest employer in the country after agriculture.
The labour department is supposed to register construction workers, but at the best only half of the labourers are registered. In any case, the department does not track their movement.