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Realty to take a sales hit after cash ban: Report

PTI | New Delhi |

Demonetisation is likely to affect realty space with a 10-30 per cent drop in sales volumes over the next 12 months, even as no major price correction is expected in the metros, says a report.

According to Kotak Institutional Equities, trying times are expected to continue. "While in the long run all can go well, it's the near to medium-term cash flows that will make developers grow/survive".

"We expect lower sales volumes over the next 6-9 months," the report said, adding that low volumes in turn would impact collections, construction expenditure and servicing liabilities.

However, little correction in pricing is expected in metros, while land prices in the small towns may witness high price cuts post a lull in sales.

Moreover, unorganised developers with little access to capital, may offer additional 7-12 per cent discounts from what is offered today.

"We expect launches to drop further as developers look to sell from ongoing projects," the report said, adding that "focus will remain on completion of projects and shifting business models to become Real Estate Regulation Act (RERA) compliant".

According to the report, no major correction in prices is expected in the western and southern metros as prices have remained stagnant for the past three years and affordability has been improving in certain markets.

Sales volumes are expected to drop between 10-30 per cent over the next 12 months, until prices stabilise.

"Salaried people, although largely unaffected by the demonetisation event, are likely to remain fence sitters for a view on property prices to correct. While for those into businesses, house buying/investment decisions could be postponed depending on the impact on their businesses due to demonetisation," the report said.

For listed developers too, sales volumes will be impacted in the near term, it added.