A land broker for nine years, Pravin Bavadiya usually cracks at least a couple of deals every month. Almost a month has passed since demonetisation was announced in November and Bavadiya is yet to score.
“I have done zero transactions in the last one month…. I have called up about 300 of my clients, but not a single one of them is interested in listening about a deal involving purchase of land. The entire market seems to have come to standstill. That is not all. Over Rs 200 crore worth of land deals that were being firmed up for registrations got cancelled ever since the demonetisation process began. Business has been affected badly,” says Bavadiya, one of the big land brokers in Ahmedabad, the largest city of Gujarat, where land transactions typically involve 60-70 per cent payments in cash.
The ripples can already be felt across real-estate markets in Gujarat, where property transactions of all kinds have decreased by 43 per cent in a single month after demonetisation. Data sourced from the office of Inspector General of Registration and Superintendent of Stamps, Government of Gujarat, show that only a mere 20,483 real-estate deals (or sale deeds) were recorded across Gujarat during the month of November 2016, which is 43 percent less when compared to same month last year.
During November 2016, Surat (3069 deals), Ahmedabad (3021 ), Rajkot (1605), Vadodara (1364) and Kutch (1334) topped the list of districts registering real estate transactions, that involved sale of all kinds of agricultural and nonagricultural land, houses, offices, shops and factories. In November, the state government earned Rs 135 crore as stamp duty and registration fees from these real-estate transactions. This is, however, only half of the Rs 273 crore earned during the same month in 2015.
“There has been a noticeable impact of demonetisation on real-estate dealings in Gujarat. It seems that this move might help in keeping a tab on skyrocketing land prices in urban centres like Ahmedabad,” said the state government official.
Though the markets have turned gloomy for land brokers like Bavadiya, they went through a purple patch just before demonetisation kicked in on November 8. Data from the office of Inspector General of Registration and Superintendent of Stamps, Government of Gujarat, reveal that in the months leading up to demonetisation, there was a spike in real-estate business in Gujarat, where over 1.1 lakh real-estate deals were executed across the state during September-October 2016, helping the state exchequer earn over Rs 817 crore as stamp duty and registration fees.
In October 2016 alone, 65,767 transactions were recorded across Gujarat, which is about 34 per cent more than 49,065 transactions recorded during the same month in 2015. Surat with 15,201 real-estate deals, followed by Ahmedabad (9,627 deals), Rajkot (5,005), Vadodara (4,634) and Kutch (2,666) were the top districts that recorded a spike in business.
Gujarat government officials say that such a traction is seen usually before Diwali. “In Gujarat, it is pretty common for the real-estate dealings to increase before Diwali as people consider it as an auspicious time,” said an state government official in the revenue department.
Real estate experts and officials in Gujarat believe that the situation will worsen in the coming months in cities like Ahmedabad. “The situation in areas that fall in a 15-20 kilometer radius of urban centres in the state will be badly affected. Nobody even wants to explore a business opportunity in these places as the jantri (the government’s assessment of value of real-estate properties) in locations away from the cities is much lower to the prevailing market rates. In other words, the cash component in such properties is higher due to the difference in value between jantri and market rates,” Bavadiya added.