Five years on, demonetisation has left a telling impact on the real estate sector with new supplies falling 44% to 9.04 lakh units across seven cities between Q4 2016 and Q3 2021. The seven cities include MMR [Mumbai Metropolitan Region], Pune, National Capital Region, Hyderabad, Bangalore, Chennai, and Kolkata.

According to a study by Anarock, a real estate brokerage and consultancy firm, the triple whammy of demonetisation, Rera, and GST has resulted in a significant deceleration in new launches. The pre-demonetisation period (2013 to the third quarter of 2016) saw new launches of 16.15 lakh units, which fell 44% in the following five years.

Notably, pre-demonetisation, while fresh supply outstripped housing sales, post-DeMo, housing sales overtook supply in the seven cities. Between CY13 and Q4CY16, while new launches of 16.15 lakh units surpassed sales of 11.78 lakh units, between Q4CY16 and Q3CY21, sales stood at 10.37 lakh units versus new launches of 9.04 lakh units.

Though there are no numbers to quantify the reduction of cash component, Anarock’s senior director and head of research Prashant Thakur says cash component in real estate purchases has fallen by around 75-80% based on anecdotal observations. “We have arrived at the conclusion based on the feedback from a diverse set of stakeholders, including end buyers, active developers in the seven cities, analysis of registration data, and scrutiny of home loan disbursal data.”

Thakur also mentions that, earlier, Anarock’s sales team faced situations where a customer would bargain for a higher discount on the price by offering a higher component of cash. “Those conversations have practically dried up,” says Thakur. However, black money could still be finding its way into property transactions in smaller towns and peri-urban areas. But on the whole, cash is slowly going off the table. One indication of that is visible in the rise of average home loan ticket size. For instance, the average loan size at HDFC, the country’s biggest home loan financier, has gone up from ₹25 lakh in 2017 to ₹29.5 lakh as of March 2021. According to a study by online loan aggregator, BankBazaar, the average home loan size increased from ₹23.82 lakh in 2019 to ₹26.41 lakh in 2020. The other big trigger for the formalisation of home financing is the slide in interest rates, with home loan rates hitting as low as 6%.

The polarisation of the real estate market towards established and multi-city developers is also the reason behind the fall in cash deals since most of these players are listed and prefer to play by the book. The trend has become more glaring post pandemic, with the top eight listed realty players' share in overall housing sales rising to 22% as of the nine months of FY21, against a modest 6% in FY17. Even well-known non-listed developers ramped up their sales — from 11% in FY17 to 18% in the first three quarters of FY21, according to Anarock.

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