Demonetisation: UP realtors adopt 'wait and watch' policy

State-owned development authorities cut prices by 10%

Even as the private real estate developers have adopted a 'wait and watch' stance over demonetisation, the state-owned development authorities and housing agencies in Uttar Pradesh have started reducing the prices of their housing properties.

While the real estate sector has been passing through a period of slump over the last few quarters, the sudden demonetisation announcement on the night of November 8 by Prime Minister Narendra Modi as a step against black money caught the players unaware.

Apart from private builders, the development authorities and UP Housing Board had already amassed unsold inventory with an optimistic outlook for the coming quarter until demonetisation came.

"The third and fourth quarters of a fiscal are generally good for the realtors. However, demonetisation has broken that cycle and it would take at least another quarter for normalcy to restore," realtor MI Group director (sales and marketing) Syed Mohammad Qasim told Business Standard.

He said the private builders in the Lucknow would remain on the 'wait and watch' posturing until January 1, 2017.

"We are awaiting more clarity over some provisions post demonetisation applicable to the real estate companies. Likewise, some segments of buyers too are in the 'wait and watch' mode," he informed.

An Additional Vice President of a prominent national realtor with projects in Lucknow on condition of anonymity maintained although buyers had indeed deferred their purchases in anticipation of prices falling, it was unlikely to come by for the organised players.

"The Lucknow market is largely organised and the prices had been reasonable. The markets in some other towns in UP could see some correction since they are dominated by local players," he added.

However, the state development authorities have effected an average 10% cuts in their housing properties. For example, Lucknow Development Authority (LDA) has decided to reduce ticket size of its properties by over 10% for its Shardanagar Housing Scheme coming up on Lucknow-Rae Bareli highway. The scheme would have 1, 2,3 BHK housing units of varying sizes.

Besides, UP Housing Board is under the process of reducing the interest rates chargeable from buyers over outstanding sale amount from 13-15% to 11% to make its properties more affordable and beat the slump.

Lucknow is the most organised real estate market in UP, outside the National Capital Region (NCR) and has over the years seen the entry of top realty players viz. DLF, Omaxe, Parsvnath, Ansal, Tulsiani etc.

Lucknow attracts both actual buyers as well as investors owing to its comparative advantages in socioeconomic parameters, law and order, public utilities, services etc.

The inauguration of Lucknow Metro Rail trial runs on December 1 is likely to further boost its realty segment.

Meanwhile, Confederation of Real Estate Developers Association of India (CREDAI) has expressed confidence that demonetisation and the promulgation of Real Estate (Regulations and Development) Act, 2016 (RERA) would usher in discipline and transparency in the sector, wherein buyers would be more secured.

Besides, the commercial banks would be flooded with a large chunk of deposits following the demonetisation, which would compel banks to lend aggressively and reduce home loan interest rates.

According to CREDAI, the home loan interest rates could fall to 5-6% and the tenure of the loan could also increase from existing 20-30 to 40-50 years, boosting the sector immensely.