The scrapping of Rs 500 and Rs 1,000 notes will adversely impact the real estate sector in Mumbai in terms of pricing and sales of units, particularly in the secondary market, according to developers and consultants. However, the move is expected to bring in some transparency in the sector, which generally has the reputation of being a safe haven for black money.
Sale of premium and luxury residential apartments in Mumbai, priced above Rs 5 crore, is also expected to be impacted. That’s because it is a common practice to charge part of the booking amount as well as amenities cost, such as parking and club house access, in cash.
In the third quarter of 2016, the Mumbai market witnessed improved sentiments and increase in the number of new unit launches, according to a report by real estate consultancy Colliers International. There was a quarter-on-quarter increase of around 70 per cent with a little less than 7,000 units launched, increasing the total number of units to 17,300 for 2016. High end and luxury residential developments constituted almost 70 per cent of the unit launches in suburban Mumbai.
Generally, a bigger cash payout means a deeper discount on the total apartment price. According to some estimates, at the moment, about 30 per cent of the total transaction value in the real estate sector is funded directly by cash. High investor-driven markets, such as the NCR (national capital region) and Mumbai and high-ticket sized units will feel the pressure of sales more than others in the near-term, a Kotak Institutional Equities report said.