Housing sales fell by 31 per cent while launches dipped 40 per cent in eight major cities during the December quarter, over previous three months, due to market uncertainty post-demonetisation, says a report.
The stock of unsold houses however fell marginally by 1 per cent to 4,53,592 units in Gurgaon, Noida, Mumbai, Kolkata, Pune, Hyderabad, Bengaluru and Chennai from 4,59,067 units in the previous quarter, said PropEquity, a real estate data, research and analytics firm. "Housing demand crashed across top eight cities in the fourth quarter of 2016 post demonetisation of Rs 500 and Rs 1000 currency notes," it said in a release.
Sales stood at 26,718 units during October-December, down 31 per cent from 38,450 units in the previous quarter.
Similarly, the launches of new homes dropped to 16,636 units from 27,696 units.
"Housing demand (absorption) across key cities declined by 31 per cent largely on uncertainty post demonetisation which led to very few transactions materialising in both primary and secondary market," the company said.
The launches of homes fell as developers were waiting to gauge the true extent of demonetisation impact on real estate before launching any new projects, it added.
"Real estate sector in India, especially housing is going through a critical transition phase post demonetisation as transaction activity has slowed down considerably," said Samir Jasuja, founder and CEO at PropEquity.
The average prices of unsold units almost remain stagnant at Rs 6,683 per square feet as buyers and sellers delayed their decisions.
"Going ahead, the recent budgetary announcement to grant industry status to affordable housing will surely provide ample push for this segment in India, a key initiative under Housing for All. Developers having projects in the affordable segment will benefit greatly with this announcement," the report said.
Meanwhile, a Nomura report said that India's growth momentum witnessed a recovery in January but was not broad-based and overall economic activity remained below pre-demonetisation levels.
The slowdown that started in the October-December quarter of 2016, post the demonetisation is spilling over into the first quarter of 2017 (January-March).
"Overall, Nomura's economic heat-map and proprietary indices indicate that activity has weakened sharply in December and, while January looks incrementally better, it is not yet broad-based and activity remains below pre- demonetisation levels," Nomura India Chief Economist Sonal Varma said in a research note.
The report further noted that the process of remonetisation appears to be progressing well and transaction demand is expected to stabilise by the end of March.
"Currency in circulation stood at 7.2 per cent of GDP as on February 10, up from a low of 5.9 per cent on January 1 and we expect a ratio of close to 9 per cent by the end of March, which should help stabilise transaction demand," Varma added.
Nomura expects GDP growth to slow from 7.3 per cent in third quarter (July-September) of 2016 to 6.0 per cent in Q4 (October-December) and to 5.7 per cent in Q1 (January-March) 2017.
Moreover, growth is expected to bounce back to an average of 7.5 per cent in the second half of 2017 and 7.7 per cent in 2018 driven by lower lending rates, pay hikes for state government employees and higher government spending on rural and infrastructure sectors.