After trying for four months to sell his apartment in a western suburb of Mumbai, Meher Verma decided to cut the price by 10 per cent. With property demand plummeting in the wake of November’s sudden ban on high-denomination notes, he’s not sure the reduction will do the trick.
“I was hoping to sell my house soon,” said Verma, who put his two-bedroom property in Andheri on the market for $400,000 in September. “Now it looks like I might have to cut my price or wait much longer for the market to improve.”
Real estate has long been a place where Indians have parked cash, often using money on which taxes haven’t been paid. Now, with the crackdown on so-called black money and the underground economy, real estate is taking a hit. The rate of home sales has fallen by about half since the government acted in early November, according to an estimate from Khushru Jijina, managing director of Piramal Fund Management. Home prices may decline 20 per cent and land prices could plummet as much as 25 per cent, according to analysts’ projections.
“Those who were looking to buy property as an investment vanished overnight from the market after the cash ban,” said Aubrey Carvallo, a Mumbai broker who has never seen International News India demand in Mumbai so low in his two decades of working in the industry. He’s been unsuccessfully seeking buyers for eight apartments with prices starting at Rs 1.5 crore. “They are thinking of moving to stock markets and other financial assets, as real estate prices are set to correct in the coming years with the government crackdown on unaccounted money.”
India’s largest developers, including DLF and Lodha Developers, say they’re taking a hit on sales. Even an association with the US president-elect hasn’t helped stoke sales at Lodha, which is building a Donald Trump-branded apartment tower in Mumbai’s Worli district. The 75-floor Trump Tower Mumbai includes a 24-hour resident manager and a fractional membership to a private jet service. The company has sold 226 of the 396 units in the project from its launch in 2014 through last June, said Lodha, which added that it limits the sale of its inventory at the Trump Tower. Lodha said in an e-mailed response to Bloomberg News that while it has notched sales of more Rs 300 crore for all its properties since November, sales would have been higher without the policy change.
“No doubt that sentiment for real estate will be subdued over the next three to six months,” said Jijina at Piramal, citing the most pressure on luxury projects India-wide and in secondary cities such as Ahmedabad, Indore and Jaipur. Markets such as the region around the New Delhi area “where some developers took only cash will be in severe trouble,” he said.