Demonetization Delivers a Blow to Indian Real Estate

24.02.2017 • Emerging Markets

By Vivek Kaul – The Vivek Kaul Letter (India) –

In the Economic Survey of 2016-2017, there was a very interesting chart on real estate.

I have reproduced that as Figure 1. What does Figure 1 tell us? It tells us that real estate launches and sales have both fallen dramatically in the aftermath of demonetisation or notebandi.

Prices have also fallen, but only marginally. There are other sources that say the same thing about home sales having come down dramatically, in the aftermath of demonetisation.

In a recent research note Ambit Capital said: “Our checks suggest that the sale of residential flats priced above Rs 50 lakh have stopped completely in Northern India (this was true in January and half-way through February).”

As per property research firm PropEquity, housing sales in the top 8 cities of the country fell by 31 per cent during the October to December 2016 period, in comparison to the same period in 2015. New housing launches fell by 40 per cent.

“Housing demand crashed across top eight cities in the fourth quarter of 2016 post demonetisation of Rs 500 and Rs 1,000 currency notes,” PropEquity said in a press release.

Long story short—home sales and launch of new projects by real estate companies have crashed post demonetisation.

Given this, the net sales (i.e., income from operations) and the net profit figures of these companies should also have come down.

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