The
effect of demonetization upon property
in Bangalore is still being felt nearly two and a half months after note
ban was implemented. Despite the fact that largely end users drive real estate property in
Bangalore, demonetization has lead to a slump in property in the city.
Demonetization has led to a drop in sales volume in both the secondary
and primary markets, experts believe that it may take as long as three to four
quarters for real estate activity in Bangalore to rise back up to pre
demonetization levels. About to be announced new projects in Bangalore have also been put on the backburner.
Disappointing Final Quarter
While in
real estate the final calendar year quarter is usually when most of the buying
and selling of property in Bangalore
occurs, this year’s final quarter has been a gross disappointment. The reason
for the lukewarm final quarter is the demonetization of high denomination notes
in early November last year. In the last months of the calendar year property
transactions usually rise by five to six percent, however this year the number
of properties bought and sold remained subdued.
The Cause and Effect
The
primary reason for the less than celebratory real estate sales during the
festive season in Bangalore is due to the actions by the center to demonetize
five hundred and one thousand rupee notes on November 8th of last
year. The Akrama Sakrama scheme and the drive again illegal constructions in
Bangalore have also played their role and are a cause of fewer real estate
deals in the city this quarter. As a result of the above-mentioned factors, Luxury property in
Bangalore were
shelved and many investors withdrew from investing in projects in the city.
About the Primary Market
In
Bangalore, mid segment houses are priced up to sixty lakhs and such flats for sale in Bangalore usually account for nearly fifty percent
of the number of units sold in the primary market. This year however demand for
such homes did not rise as expected as many buyers preferred a wait and watch
approach before choosing to venture into real estate in the city.
Real
estate insiders also believe that there is a trust deficit between builders in Bangalore and
buyers due to the note ban, which has led to fewer transactions this year. Even
the lower home loan interest rates announced on January 1st did
little to infuse the real estate market in Bangalore with a positive sentiment.
Fewer Takers For Seconds
Due to
the note ban, fewer buyers are willing to buy in the secondary market, as most
consumers prefer to adopt a wait and watch approach. The buyers psyche leads
him to believe that there will be a price correction while at the same time
that sellers are unwilling to sell properties at low price, which may hurt them
financially. The confusion over the Akrama Sakrama scheme has also led to fewer
buyers buying real estate in Bangalore
at the end of last quarter and in January of this year.
The Ground Reality of Bangalore Realty
The
Availability of New projects in
Bangalore has fallen drastically since October of last year as builders and developers in Bangalore
have shifted their focus toward completing ready to move in projects. The
supply of new projects in Bangalore
fell by nearly four percent in the final calendar year quarter of last year.
Furthermore a trust deficit between the government and builders in Bangalore has led to fewer new developments in
Bangalore. Many builders in Bangalore
today are considering raising funds for development via joint ventures rather
than through high interest rate bank loans.
Conclusion
The
market is expected take up to year to bounce back but will become more infused
with vigor due to the implementation of RERA as well as the GST both of which
will add greater transparency to buying and selling real estate in Bangalore.
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