11th November 2016 - Impact of the unaccounted money sweep-off on property in Gurgaon with a view to the future
The latest ‘sweep off' by Prime Minister Modi as far as unaccounted money goes is likely to have effects. However the extent to which the effects will filter through the property market are less pronounced in our opinion contrary to popular belief.
We do believe that the move is likely to have an impact furthering towards steady growth of the economy in the long term and also in real estate. Real Estate Regulation Act will go hand in hand when it comes into effect. We are not likely to see multiples of growth like in the past when the next boom phase kicks in but steady growth and more end user demand.
Primary market sales are in a way immune in CBD areas and tier 1 cities as they are on cheque basis in any case. Secondary market residences may see a hit in pricing in the short run - more so in secondary business districts and tier 2 cities. There's also the theory that a lot of investors who were willing only to deal in unaccounted money will now hold off selling until the next boom phase kicks in.
We do feel the market needs 1-2 years for growth & traction and we are positive about the effects of all cheque deals stimulating end user demand in the long term (5 year perspective).
REITS formations and more FDI inflow are steps in the positive direction in an attempt to increase transparency.
Capital appreciation potential of large plate office spaces is likely to appreciate less than residential assets in the next five years or so. The reason is that we see the trend of ‘renting office space' rather than ‘buying office space' to continue. Office Leasing take-up showed healthy signs in Gurgaon in the first half of 2016, testified by market leader DLF's CyberCity buildings operating at near full capacity as of late.
It is infact office leasing growth that we believe will steadily improve over the next couple of years which in turn will encourage residential rentals and also buying interest from end users be it corporates or business persons.
I would watch the next couple of quarters closely and monitor business & real estate sentiment. Overall, a step in the right direction from Prime Minister Modi - a bold one and positive I would tend to think..
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