House buys fall to lowest in six years
The story with the real estate sector, post the note-ban, appears grim. On a day when ratings agency Fitch revised down its GDP growth forecast for the financial year ending March 31 (FY17) to 6.9 per cent from 7.4 per cent in the wake of the demonetisation drive, leading real estate consultancy firm Knight Frank said that demonetisation had delivered a body blow to the real estate sector.
Reason: 2016 ended with the lowest launches and sales of residential projects since 2010. Fitch on Tuesday said demonetisation has caused short-term disruption in India’s economy and led them to downgrade their growth forecasts for 2017.
The move has some potential benefits, but the positive effects are unlikely to be str­o­ng or last long enough to ma­ke a significant difference to government finances or medium-term growth scene.
The withdrawal of bank notes has left consumers wi­t­hout the cash needed to co­m­plete any purchases, said Fitch. Quite in line with Fitch observations, the Kni­ght Frank report on realty released on Tuesday said sales volume and new launches fell by 23 per cent and 46 per cent each in the second half of 2016. The fourth quarter of 2016 saw a significant drop by 44 per cent year-on-year and new launches fell by 61 per cent, it added.
To add to the sector’s woes, it has witnessed a notional loss to the tune of Rs 22,600 crore in the top eight cities across the country. The government, on its part, has witnessed a loss of Rs 1,200 crore by way of stamp duty revenue loss in the residential segment, the Knight Frank report said.
Significantly, this has ha­p­pened in a year that started on a positive and bullish note. “Political stability, regulatory environment, enha­n­ced infrastructure, strong investments, approval to the GST bill and amendments to Reits led us to the feeling that the year would end on a high note. However, demonetisation pulled down the last quarter sales across all cities," said Shishir Baijal, chairman, Knight Frank India, adding: “The fall in Q4 was intense, H2 2016 ended below H2 2015. 2016 ended at launches and sales being lowest since the global financial crisis.”
And if what Knight Frank said in its report is anything to go by, there is no respite in near future either. “Uncertainty may continue in the next quarter. 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,” it said.
In 2017, lower home loan interest rate, Rera and GST, likely fiscal benefits for taxpayers in the Union budget, enforcement of Benami Tra­n­sactions (Prohibition) Am­e­ndment Act and demonetisation are likely to infuse the “feel good factor”, which is extremely important for the revival of the sector,” it said.
While performance in the residential realty is nothing to write home about, the office market has grown wi­th 2016 office demand holding steady with 2015 level.
Columnist: 
Ritwik Mukherjee