Residential market has witnessed a decline in the second half (H2) of 2016 on the back of the government's demonetisation move resulting in fall in sales volume and new launches in the fourth quarter (Q4) of 2016, said a latest report by Knight Frank India. 

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The independent global property consultancy firm on Tuesday launched sixth edition of half-yearly report titled 'India Real Estate', which covered eight cities across India namely Mumbai, NCR, Pune, Bengaluru, Chennai, Hyderabad, Kolkata and Ahmedabad. 

In a surprise move to curb black money, corruption and terrorism, prime minister Narendra Modi on November 8 announced demonetisation of old currency notes of Rs 500 and Rs 1,000 as legal tender from circulation, resulting in cash crunch across the country.

According to Knight Frank India findings, the sales volume and new launches in the residential market fell by 23% and 46%, respectively in all eight cities in H2 2016. 

Similarly, the sales volume in the residential market dropped by 44% year-on-year (y-o-y) and new launches fell by a massive 61% year-on-year (y-o-y) during the fourth quarter (Q4) of 2016. 

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The first half (H1) of 2016 started on positive note whereby witnessing a rise of 7% in residential sale volumes as compared to H1 of 2015, but the government's announcement of demonetisation of old currency notes led to decline in sales volume in the last quarter of 2016, cited the report. 

" The residential market of the top eight cities in India started off on a positive note in 2016 with H1 2016 witnessing a 7% jump in sales volume compared to H1 2015. H2 2016 also began at the same pace with Q3 2016 sales volume showing a positive growth on the back of the start of the festive season. All these factors coupled with political stability, regulatory environment, enhanced infrastructure, strong investments, approval to the GST bill and amendments to REITs led us to the feeling that the year would end on a high note for the residential property sector. But the demonetisation move pulled down the last quarter sales across all cities. The fall in Q4 was intense, H2 2016 ended below H2 2015. 2016 ends at launches and sales being lowest since global financial crisis," Knight Frank India chairman and managing director, Shishir Baijal said in a press release. 

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Among all the eight cities surveyed by the Knight Frank India, National Capital Region (NCR) was the most affected market whereby it witnessed a de-growth in demand and supply by 29% and 73% in H2 2016, respectively.

The findings showed that Bengaluru's residential market too registered a fall for the first time since its peak in 2013 with new launches and sales decline by 17% year-on-year (y-o-y) and 7% year-on-year (y-o-y), respectively.  

Similarly, the Mumbai Metropolitan Region (MMR) lost its recovery mode in the residential segement with new launches and sales plummeted by 53% and 26% in H2 2016, respectively. 

The upcoming quarter is continue to pose challenge for the residential segment and will depend on how the developers capitalise the opportunity of various reforms started by the government. 

"Uncertainty is likely to continue in the next quarter. It will be important to see how developers recalibrate their businesses to the changing environment and, whether buyers capitalise the opportunity of various reforms and change their status quo position of ‘wait and watch’," Baijal said. 

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