Dubai: India’s property market is finally shedding its post-demonetisation induced fears. Developers are starting to see enough happen on the selling side in recent weeks to get their sales and marketing initiatives into gear. But, as far as new launches go, they are still taking it easy, waiting for further signals that demand is correcting itself.

“Even though prices remained stable in most large markets, sales velocity did come down quite a bit in November,” said Vikram Chari, Chairman and CEO of Smart Owner, an online real estate marketplace. (It was on November 8 that the Indian government imposed restrictions on cash withdrawals as it phased out some of the higher currency denominations and brought in a new series.). “Since then, sales velocity has been rising gradually … but still below its long-term trend. The decreased sales velocity is likely the result of a few buyers waiting to see whether prices decline. However, I believe they are making a mistake because fundamentals actually suggest prices will go up — not down — in most major markets as a result of demonetisation.”

But it has taken a full four months before buyers started to inch their way back into the market. Even then, India’s developers will see this as a respite — when demonetisation was announced, there were widespread fears that the whole of 2017 could prove a wasted year for real estate. These were well-founded concerns, with a sizeable number of transactions — both property and land — being all-cash purchases. The problem was such funds were rarely generated through formal channels (In other words, the much-touted “black money”).

“The higher-end sector is experiencing some weakness,” said Chari. “This is consistent with the underlying economics of high-end transactions, because while middle-class buyers have been paying mostly by cheque and bank loans, those purchasing high-end properties are more likely to use cash. It is this segment we are seeing an impact.

“I think the current market conditions may give buyers of high-end properties an opportunity to negotiate better discounts than they would normally be able to. Over time, this market segment may stabilise — so the present moment may be the best time to capitalise on the impact of demonetisation.”

Developers with high-end projects have in recent weeks been making a concerted push to generate interest among non-resident Indians in the UAE and the Gulf. Where they are not making pitches to select potential buyers, they are doing so through property exhibitions.

Artech, based in the southern state of Kerala, is trying to generate traction for what is billed as the costliest apartments in the state. Units at its “Diamond Enclave” in Thiruvananthapuram — the capital — range between Rs35 million to Rs70 million (Dh3.9 million). And those price tags were virtually unheard of in that particular marketplace for this property category … until now.

“High-end villas were the norm until last year … however people are now moving to luxury apartments,” said T.S. Asok, Managing Director of Artech Realtors. “Post-demonetisation there was a definite dip in the demand for luxury. But the last quarter of the 2016 financial year (January to March end), demand has picked up and new enquires are coming in.

“These are predominantly NRIs, but not cash buyers.”

In a recent commentary, JLL India’s CEO and country head, Ramesh Nair, noted: “Guidance from RBI (Reserve Bank of India) forecaster surveys and other market analysts suggests that inflation will remain rangebound at 4-6 per cent, within the comfort zone of the central bank. The latest inflation data may have shown a spike, but it is still expected to remain rangebound within a comfortable zone.

“In the near term, given increased housing affordability and purchasing power as well as benign inflation levels, the environment is conducive for housing demand to revive.”

According to M.P. Ahmad, Chairman of Malabar Group, “It may take time ... but demonetisation will definitely push real estate activity into the organised sector. That means less reliance on illegally sourced/generated funds and where all transactions get proper registration.

“We see scope in created satellite townships targeted at the IT or tech services industry as well as shopping centres in Kerala. The land acquisitions are going on — we could have launched the first project earlier, but a government order notifying the land acquisition got delayed. We will resolve it. These are incidental issues, and part and parcel of real estate development in India.”

Southern comfort

Property market sentiments in south Indian cities seem better placed.

* One of India’s southern metropolises, Bengaluru, is placed right in the vanguard of the turnaround story. “It has low current prices, rapid population growth, and high growth in white-collar jobs,” said Vikram Chari of Smart Owner. “It is not just the number one commercial property market in India but is also the country’s leader in office space absorption. The vacancy rate for office space in Bengaluru is only 3 per cent.”

* Hyderabad is rated as “another interesting market — It witnessed a steep downturn due to the controversy over the state capital but has recently been recovering very strongly,” said Chari. “Pune and Chennai are interesting, although not yet to the same extent that Bengaluru is.”