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Even as the sale of pre-owned houses and developer-built small properties have come to a standstill, the realty industry hopes the quantum of home loans will pick up after stability returns and eventually lift its fortunes.
"In the NCR (National Capital Region), 35-40 percent of the money involved in the sale of pre-owned houses was in black. Only circle rates were covered in white. This has stopped after demonetisation," said a property consultant in south Delhi's Kalkaji area.
"Similar is the case with the sale of flats that are built by developers -- properties that are taken over from existing independent house owners and developed into new houses. This kind of business has also come to a halt," he added.
"The only hope now is that, once the demonetisation drive stabilises -- say in three-four-six months -- banks will extend more housing loans. I don't see a problem since prices have crashed 25 per cent. That is our only hope," the property consultant said.
Industry insiders said that the demonetisation move is expected to give a sales push as banks will be willing to lend more at attractive rates to those keen to buy flats and properties.
Demonetisation is expected to bring in more deposits to banks and give them more maneuverability in giving loans. It will also provide a chance to the realty industry to offload its inventory.
The government had on November 8 demonetised Rs 500 and Rs 1,000 notes ostensibly to curb black money, undermine terror financing and end corruption.
"The primary sale of the houses will go up with the demonetisation move as the banks will lend more money to actual buyers," Manoj Gaur, Managing Director of Gaursons India, told IANS.
"Banks are expected to lend money at a better rate of interest following an increase in their deposits. So, instead of parking their money in bonds or fixed deposits, people would prefer to buy property in the coming days."
Gaur said the negative impact of the demonetisation move will be greater on the secondary market, which in realty sector parlance means re-sale of land and pre-owned houses.
"The secondary market, in which the big deals of lands and houses were carried out at low circle rates, will feel the impact," Gaur said.
Vinod Bahl, a senior journalist who writes on real estate, said that the sector may see a revival after December as customers would await a drop in home loan rates.
"I do not believe in the prediction of a few people that the property prices would go down by 25 per cent. Loan rates might drop in December after the policy statement is released. It will be reflected in a cut from 15 basis points (BPS) to 25 BPS and there would be more reduction in loan rates in the coming months," he said.
The Reserve Bank of India (RBI) is slated to update the monetary policy on December 7.
Bahl also said that the sales have gone down as there are fewer transactions following demonetisation.
"There was some momentum seen during the festive seasons as good deals were offered by the developers, but that has taken a back seat and buyers are waiting for price correction and the rate of home loans to go down," he said.
Jaishree Kurup, Head, Editorial and Advisory, at Magicbrics.com, told IANS: "The cash-savvy market has been most affected due to the demonetisation mainly in north India and in Mumbai. Markets like Hyderabad and Chennai, which are not so much dependent on high cash transactions, have remained unaffected."
"Deals which had 30 to 40 per cent of cash transactions have got cancelled in recent days, while the deals which were based on home loans did not get affected," she said.
Ravi Ramu, CEO and MD of VBHC-Value Homes Private Ltd., said land will begin to come at rationally lower prices. "Real estate to the extent it depends on cash transactions is dead for now," he said, adding that home sales from builders who have operated in the past without cash will substantially increase.
"India's GDP will steadily rise as the black money economy is largely snuffed out in the near-term and transactions get recorded in the mainstream economy. The fear of such bold anti-black wealth moves will presumably drive more to the 'whiter' way of doing business," Ramu said.
He too said interest rates will surely fall for the consumer. "Cheaper home loans and car loans and personal loans will fuel consumer spends," Ramu added.
(Anand Singh can be contacted at email@example.com)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)