CHENNAI: Demonetisation has hit the realty sector in Chennai hard and the estimated revenue loss to the business is pegged at Rs 1,100 crore. The loss to exchequer from stamp duty is Rs 50 crore, according to a report by Knight Frank, a London-based global property firm.
Kanchana Krishnan, Director, Knight Frank India, said there had been a 46 percent fall in sale during the fourth quarter. The loss was such that the sale in terms of units in the last quarter was just 2,321. It was just about half of 4,299, the average sale in the corresponding period of 2014 and 2015.
It is not only Chennai, but cities across India suffered due to demonetisation with the second half sale in 2016 registering way below 2015, the lowest since global financial crisis.
And Knight Frank predicts that the first two quarters of this year will not be good enough for the realty market which could see substantial slow down in sales.
Stating that it is difficult to crystal gaze into 2017, the firm pins its hopes on implementation of Real Estate Regulation Act, Goods and Services tax, lower home loan interest rate regime and fiscal benefits for tax payers in the Union budget.
Interestingly, in the first half when the launches crashed by 36 per cent and sales by seven per cent, Knight Frank predicted a further fall of nine per cent in launches and one per cent in sales. Surprisingly, due to demonetisation, the new launches further crashed by 18 per cent and sales by 12 per cent making it the worst year for realty sector. The report says the unsold inventory in Chennai stands at 30,926, which is a six-year low due to excessive reduction in supply. “It would take 20 to 24 months to offload it,” said Kanchana.
The sales level that averaged close to 13,500 units every half-yearly period before the first half of 2014 dipped now to 9,100 units, says the report.
Overall, the city witnessed a fall in new launches with western Chennai experiencing a massive dip in share.
The south Chennai market hardest hit by rain during 2015 has seen a recovery with new launches happening at Kelambakkam, Mahindra World City, Ottiambakkam and Siruseri.
The central parts of the city saw little residential development as the premium segment too was hit. However, the firm predicts a demand in western Chennai, especially at Kolapakkam and Maduravoyal due to an increased uptake of lower priced inventory and good connectivity to Mount Poonamallee High Road and Valasaravakkam besides the revival of Maduravoyal-Chennai Port elevated corridor. The second half of 2016 experienced the highest transaction levels of any half-yearly period in the history of Chennai office space market on the back of big ticket transactions by TCS, Accenture, General Electric among others.