As against general perception, real estate prices actually increased across the country during the demonetisation quarter going by latest House Price Index figures released on RBI’s website. The all India House Price Index (HPI) increased by 2.3% from 234.9 for second quarter of 2016-17 to 240.2 in Q3 (October to December 2016) of 2016-17 as per provisional figures. This quarter would reflect the impact of demonetisation of the old Rs 500 and Rs 1000 notes by the government on November 8, 2017.
It was widely predicted that real estate sector would be hit badly by this move. Housing prices during the third quarter of 2016-17 in seven out of ten cities sampled in the RBI Housing Price Index show an increase.
The Reserve Bank of India (RBI) Database on Indian Economy displays the HPI for 10 major Indian cities: Mumbai, Delhi, Chennai, Kolkata, Bengaluru, Lucknow, Ahmedabad, Jaipur, Kanpur and Kochi and at the all-India level.
Commenting on these figures, Ramesh Nair, Chairman & Country Head, JLL India said “The RBI’s Housing Price Index reflects the data obtained from property registrars across the country. The increase in question here could be attributable to the fact that the Benami Transactions Act as well as demonetisation caused a rush among property holders to register their properties at prices closer to the market rate. In this respect, it is a unique phenomenon in the history of Indian real estate as all avenues to register property transactions at lower values have now been closed.”
This may have happened as people did not want to become potential subjects to scrutiny, and would want their property holdings to be legitimate in every respect.
The HPI for All-India (base 2010-11=100) sequentially increased to 240.2 in Quarter-3 2016-17 from 234.9 in the previous one (Q2 of 2016-17) showing a marginal increase of 2.3 per cent (rounded off). According to the provisional data available on the RBI website, the HPI of Kanpur witnessed the maximum increase of around 12.2 per cent (from 107.8 in Q2 2016-17 to 120.9 in Q3 2016-17) followed by Lucknow which saw an increase of around 8.2 per cent (from 311.6 in Q2 2106-17 to 337.1 in Q3 2016-17).
All India index is a weighted average of city indices, weights based on population proportion.
**(P) Provisional indexes which will be finalized by next quarter.
The Modi government’s move to clamp down on black money hoarders by demonetising Rs 500 and Rs 1,000 currency notes was expected to have a cooling effect on many pockets of the property market in the country. Since traditionally cash has been an integral component of payment in majority of real estate deals, the note ban was expected to hit realty sales.