Sales momentum of real estate in India is recovering slowly following the sharp fall witnessed post the government’s demonetisation move, said ratings agency Moody’s Investors Service. The sales volumes are expected to gradually accelerate in the affordable housing sector as liquidity returns post demonetisation move.
Sales volumes in India’s real estate sector decreased by around 40% year on year in the fourth quarter of 2016, while launches dropped by around 60% during the same period. There were signs of extreme caution by buyers, and real estate developers refrained from announcing any new launches during this period, the ratings agency added.
The government had announced demonetisation of high-value currency notes on November 8.
“Sentiment in the sector has since improved. Measures in the 2017 budget will support the affordable housing segment, while reductions in home loan rates since November 2016 will improve demand,” Moody’s said. “One measure introduced in the budget was the granting of infrastructure status to affordable housing, which will allow developers to borrow at lower interest rates. At the same time, the government introduced measures to prop up the secondary market. A more liquid secondary market will in turn benefit the primary market.”
However, it expects the sales for the luxury and mid-market segments to remain weak for another 12 to 18 months. Given the generally discretionary nature of buying a house, the real estate sector will be one of the slowest to recover from the impact of the demonetization.