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Currency pullback: Deal talks go quieter as cash dries up

The first month of demonitisation announcement saw a common theme running across the country, so far, as the real estate sector is concerned.

Written by Smita Nair , Pragya Kaushika , Prashant Pandey , Vinod Kumar , Avinash Nair | Mumbai/new Delhi/ahmedabad/mohali/panchkula/randhi/jharkhand |
December 10, 2016 2:08:27 am
demonetisation, cash crunch, new currency, black money, real estate fall, real estate, chandigarh, jharkhand, mumbai, delhi, punjab, Gujarat, market, property deal, property registration, property sale decline, real estate, indian express news, india news, economy Sharp fall in real estate transactions and registration of properties was witnessed by the registrar’s offices, not only in Delhi and Mumbai but also in cities such as Ranchi, Surat, Panchkula, Rajkot and Vadodara, among others. (Illustration: C R Sasikumar)

Maharashtra: 39 per cent decline in stamp duty revenue from Mumbai

A month into the withdrawal of high-value currency notes, revenue from stamp duty slid to Rs1,305 crore in November in Maharashtra, compared to the monthly average Rs 1,643 crore prior to November 8, when the government announced the decision to scrap the notes.

While there was pick up from November 17, there were bigger dips in collections between November 20 and November 28. Last year, the government netted Rs 1,464 crore from stamp duty in terms of revenue in November, but it was also a slow month in a period marked by a slump, said officials. In August, revenue from stamp was much higher at Rs 1,748 crore, dropping to Rs 1,608 crore in September and then picking up in October at Rs 1,908 crore thanks to sales in the festive season of Diwali.

The decline has been very pronounced in Mumbai — one of the top realty markets in the country — at 39 per cent for registration of properties compared to 29.9 per cent across the state in eight registration circles. Against a daily average of Rs 20 crore in stamp duty collections between April 1 and November 8, India’s financial capital could report just Rs 12 crore in daily collections after demonetisation, according to officials.

The Department of Registration and Stamps, Maharashtra, is now adopting a “wait and watch” policy” preferring to wait for the figures for December before making a full assessment on the impact of demonetisation on real estate in Maharashtra. Real estate agents expect more sales in December. However, the department is still unsure if it will achieve the target of Rs 23,548 crore from stamp duty for fiscal 2016-17 after the government’s decision to scrap high value currency notes of Rs 500 and Rs 1,000.

Prior to November 8, the average documents registered daily was 7,721. But going by the latest data, in November, a daily average of 4,583 documents were registered – hardly an encouraging sign considering that sales had just started recovering after a slowdown. With the number of registrations continuing to be 36 per cent lower than the daily average – clearly, it will take time for a reversal of the trend.

“Our daily online payment for stamp duty though is improving. We are recovering Rs 55 crore daily. Earlier, it was Rs 58.3 crore till November 8. It is hardly six per cent less than regular. But we will have to wait for some more time as we receive bulk payments from the Bombay Stock Exchange too and that could change the figures,” said N Ramaswamy, Inspector General of Registration (IGR) and Controller of Stamps.

“For share transactions we get stamp duty from the Bombay Stock Exchange which is around Rs 400 crore annually so that bulk payment sometimes comes. This month it came on November 28,” said Ramaswamy. In 2015, the final collections at Rs 21,767 crore exceeded the target of Rs 21,000 crore. The decline has been very pronounced in Mumbai — one of the top realty markets in the country — at 39 per cent, from registration of properties, compared to 29.9 per cent across the state in eight registration circles. Against a daily average of Rs 20 crore in stamp duty collections between April 1 and November 8, the capital city could manage a meager Rs 12 crore in daily collections post demonetisation, according to officials.

Delhi: In the capital, registrations decline 16.4 per cent in Nov 2016

For a sector already in the doldrums for at least five years now, the Center’s move to demonetise high value currency last month has hit real estate in Delhi hard. Figures from Delhi’s 21 sub-registrar offices show a sharp decline in property registrations after Rs 1,000 and Rs 500 notes were withdrawn on November 8.

Consider this. In November 2016, property registrations declined by 38 per cent compared to the last month.

Between August and September, sale deeds decreased by 7 per cent and rose by 15 per cent in October. Compared to November 2015, registrations dipped by 16.4 per cent in November 2016.

Sources in the Delhi government pegged the dip in registrations in September to the shraadh season. “This is a period considered by many to be ominous for undertaking any business or new transactions. The shraadh period starts from the middle of September and usually ends by the first week of October,” a senior government official said.

Sources in the Delhi Revenue department point to the increase in transactions in October. “Property transactions picked up in October 2016 as it is considered an auspicious period,” an official said. Santhosh Kumar, CEO, operations, JLL believed that the shraadh and navratras play important role in real estate market. “In addition to the religious beliefs, many schemes are launched and discounts offered in this season to lure the customers and thus the sale deeds usually go up,” said Kumar.

In November, the decline was high in upmarket areas in South Delhi. A comparison between October 2016 and November 2016 showed that Sarojini Nagar witnessed a drop of 52 per cent whereas Defence colony showed a drop of 29.83 per cent, Mehrauli too went in slump with 24.77 per cent drop in sale deeds and Hauz Khas witnessed drop of 33.67 per cent.

According to Kumar, the residential sector seemed to be hit by demonitisation, a sentiment that was echoed even in official circles of Delhi government. “In the residential sector, secondary units — sold and bought for more than two times — are most hit. And we all know, the sector is cash driven,” said the CEO, operations, JLL, a real estate consultancy firm.

Kumar also added that the market also depends on demand and supply and this is the reason why the commercial sector is least hit. “The supply for commercial is on lower side compared to the residential. But, it is true that we are waiting and watching the impact of demonitisation on the market in the long run,” added Kumar.
Haryana: ‘No sale/purchase of property in Panchkula post demonitisation’

Demonitisation has led to a drop in the number of registration of properties in Panchkula district. As per official record of land revenue department in the district which comprise Panchkula City, Kalka, Raipur Rani, Barwala and Morni, as many as 500 properties were registered from November 8 to November 30. During the corresponding period last year, a total of 606 properties were registered. In fact, in the previous month between October 8 and October 30, 2016, a total of 692 properties were registered in the district.

Post demonetisation, 212 people got their properties registered in Panchkula City, 155 in Kalka, 53 in Raipur Rani, 65 in Barwala and 15 in Morni. Last year, 227 properties were registered in Panchkula City, 221 in Kalka, 66 in Raipur Rani, 80 in Barwala and 12 in Morni.

Aggarwal, president of Haryana State Property Dealers Association, said that the number of property registration will further decline in coming months. “The deals of the properties which were registered in the month of November were done before demonitisation. There has been no sale/purchase of property in Panchkula post demonitisation,” said Aggarwal.

He further said that due to already sluggish property market, the prices of sale/purchase of both residential and commercial properties have already gone below the collector rate in various parts of the district.

Deputy commissioner (DC), Panchkula, Garima Mittal, said that the situation will get better in next few months. She stated that the district administration has equipped land revenue department with point of sale machines to facilitate customers.

Jharkhand: Property market witnesses a near two-third reduction in state

The property market in Jharkhand, in terms of land and other property transactions, have been reduced to merely a third of what it was five months ago, thanks to demonetisation, official figures reveal.

Officials said that the trends were as expected. Insiders said that the property market has nose-dived.

As per official figures, the total number of deeds finalised in the month of July, including land transactions and sale/purchase of flats or apartments and commercial properties was 13,554. In the following months, there was a gradual decline, before a minor revival in the month of October. And then in November, this number came down to 4,404, which is nearly 32 per cent of the highest figures achieved in July.

In terms of total fee collected, the drop witnessed was over 76 per cent, from a total of around Rs 72 crore in July to only Rs 17.10 crore in November.

In Ranchi, which is the biggest property market at least in terms of residential and commercial properties, the total number of deeds finalised in its five sub-registrar offices Ranchi, Ranchi Rural, Ranchi Urban 2, Ranchi Urban 3 and Bundu stood at 2,623. In November, it came to merely 703.

“The trend since July is expected. And, obviously there is a decline in November following the announcement on November 8,” said IG (Registration) Bal Mukund Jha, while adding that he was out of station.

“We have had days where sub-registrar offices did not register a single deed in the entire days following demonetisation,” said another senior official from land department.

“The surge in July and August is because the government has adopted the strategy for revising the circle rates every year late in the month of August or September. So, those wanting to wait for a few months rush to buy it around July and August. Then, companies offer good deals to attract people after Dussehra and up to Diwali and Chhath. That is when the market picks up again. That did not happen this time,” said the official.

With the government trying to bring in changes in the Chotanagpur Tenancy Act and the Santhal Paragana Tenancy Act and the politics heating up due to this, the speculator/investor category had been playing safe. “People are waiting to see what will finally happen. And, now this (demonetisation)! It had to nose-dive. I had a buyer ready to sell accepting old notes in the first few days. But the buyer became smart enough seeking a huge reduction. The deal never happened,” said property dealer Dhirendra Mishra.

Chandigarh: ‘Most deals couldn’t materialise’

Post demonetisation, there has been a dip of around 30 per cent in the registration of properties in Chandigarh.

As per records with the revenue department, where there were 127 sale deeds between October 8 and November 8, there were only 91 sale deeds between November 9 and November 30.

The sale deeds include both leasehold and freehold properties. Amaninder Singh, Tehsildar at the Revenue department said, “ On an average around 130 properties are registered every month. There has been a downward trend this time.”

According to those who deal in properties, as people did not have much cash in hand post demonetisation, most of the deals could not materialise.

“People neither had much cash in hand nor the sellers wanted to accept the demonetised notes. Also, because the rates of the properties dipped, the sellers too did not want to go in losses and some deals may not have materialized,” said JK Bedi, a property dealer based in Chandigarh.

Bedi said that the real estate will remain affected for around six to seven months and things will resume to normal soon.

Mangat Rai, another property dealer said that there will be hardships but the decision of demonetisation will cleanse the real estate sector.

The revenue department has been asked to keep a check on registration of properties ever since the demonetisation of 500 and 1000 notes was announced.

According to some estimates, prices in Chandigarh have already fallen by around 35-40 per cent. “As the prices have dipped, some of the sellers are not even interested in going in for any deals as of now. On the other hand, buyers are finding it the right time to afford a house,” said Vishal Sharma, another property dealer.

Punjab: A 20 per cent hit for Mohali in November

The number of property registration has come down in Mohali since the government declared currency notes of Rs 500 and Rs 1000 illegal. Experts said that the number of property registrations may further come down in the months to come.

According to the officials of the revenue department, the number of sale deeds has decreased in all the three tehsils-Kharar, Mohali and Derabassi in the district. The district which is one of the biggest real estate market in the region is already struggling with a slump in the market.

According to officials, a total 251 sale deeds of properties were registered in Mohali tehsil in November this year while in 2015 total 315 deeds were registered in the same month in 2016. The officials said that there is a decrease of around 20 per cent in the registration of the properties.

In Kharar Tehsil, where many housing projects are presently underway also noticed a decrease in the registration of property sale deeds.
According to the officials, in November this year, a total 501 sale deeds were registered in the tehsil office while in 2015 in the same month total 698 sale deeds were registered with the revenue department.

In other real estate hotbeds Derabassi and Zirakpur, the revenue department also recorded a decrease in the registration of sale deeds. In November this year total 350 sale deeds were registered in Derabassi while 350 deeds were registered in the same month in 2015. In Zirakpur in November this year the number is registered sale deeds is 216 while in 2015 the number was 300.

G B Singh, a Mohali based property consultant while speaking on the issue said that the number of sale deeds shall come down in the coming few months as the demonitisation will further effect the sale and purchase of property.

Gujarat : Sale deeds dip 43 per cent as state sees ‘noticeable impact’

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.

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