Will property prices increase or fall post new GDP growth rate of 6.1% (Jan-March) ?

by cheatuserblog Posted in FAQs on Real estate, Real Estate Jun 03, 2017

Post demonetization, GDP growth rate for October –December 2016 quarter and January 2017-March 2017 quarter surprised everyone and it was generally felt that the data is not reflecting real ground situation. The estimated growth numbers were quite surprising when the pain of demonetization was visible in almost every sector.

However, the new data is indicating that the growth rate has been reduced to 7% and 6.1% in the last two quarters of FY 2017 from an average of 7.7% of its two previous quarters. The GDP growth 6.1%(Jan-March) is well below GDP number of 2013-14, the worst year of growth paralysis under UPA.

The growth rate of 6.1% for the last quarter of FY 2017, also conceals more than it reveals. Barring agriculture and government expenditure, all sectors, especially manufacturing, construction and financial services, decelerated significantly. Bank credit growth is lowest in 60 years and informal/small economy is squeezed of cash! The economic revival may take another 1-2 quarters.

In real estate, for two months, (November and December 2016), sales were almost zero except for the developers who managed to sale in old currency. Construction on most of site was slow. The revised data is now reflecting negative growth rate (-3.7%) in construction sector.

Uncertainty due to the new RERA law and lack of infrastructure in implementing RERA can continue to keep real estate sector slow for next 5-6 months. A fear has been created that absence of new supply may push up the prices, however, at the same time the affordability and confidence of consumers is also shaken due to job uncertainty, lower job creation and broader macro-economic outlook.

Real estate prices, at best, can’t go up if it can’t go down. Largely due to supply demand dynamics.

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