Note ban will force real estate industry to mature: CRISIL

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26 Aug, 2025 12:21

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Moneycontrol Bureau
The government’s decision last November to devalue 86% of the currency in circulation will have a positive impact on the real estate sector in the long run as it will force the industry to mature, according a report by CRISIL Research.

In its ‘State of the Industry’ report on the sector, the research agency said that the Real Estate (Regulation and Development) Act, which came into effect last May, would also help the long-term prospects of the sector as it would bring in transparency and end-user confidence.

While optimistic about the future, the report sounded a note of caution in the short term, saying the note ban would “seriously pinch” real estate in the short term because of the high volume of unaccounted cash transactions. It expects demand to fall 5-20 percent in cities over the next one to two years. The worst affected will be cities like Mumbai and the National Capital Region, both of which have high unsold inventory, greater proportion of premium units and/or higher share of investors, according to the report. It also expects average capital values to follow a similar trajectory in these cities.

According to the report, 2016 saw average residential capital values under pressure in the 10 major cities because of weak macreconomic conditions and the resultant subdued demand from investors and consumers. These cities included Ahmedabad, Bengaluru, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai Metropolitan Region, National Capital Region (NCR) and Pune.

In the cases of Chandigarh and NCR, prices contracted 3-5% on-year on the back of high inventory levels. In Pune,  low sales volume resulted in discounts, leading to a price correction of 3-4 percent at the city level. The report said capital values remained flat at an aggregate level.

While the aggregrate revenue of 29 listed developers fell 9 percent on-year in the first half the curreny financial year, largely owing to the performance of DLF Ltd, which comprises about 26 percent of the set and posted an 11 percent revenue decline.

A similar trend was witnessed in the revenues of Puravankara Projects Ltd and Prestige Estates, which fell 22 percent and 41 percent respectively. However, Oberoi Realty Ltd and Sobha Developers Ltd bucked the trend, rising 42 percent and 16 percent respectively.