Residential real estate prices fell across the country in 2017 due to demonetisation, the implementation of the Real Estate Regulation Act (RERA) and goods and services tax (GST).

According to a Knight Frank report, prices fell by an average of 3% across cities, with Pune witnessing the highest decline, 7%, followed by Mumbai at 5% in 2017. Prices in the NCR, which had already fallen in the last six years, dropped another 2% on average.

The main reason for the fall is poor demand. Sales in Bengaluru, NCR Delhi and Chennai fell sharply — 26%, 6% and 20%, respectively. However, the Mumbai and Pune markets witnessed a slight upward movement. The report pointed out that as RERA had been implemented properly in Maharashtra, sales had picked up in Mumbai and Pune by 3% and 5%, respectively.

Because of slow sales, launches witnessed an unprecedented slowdown during the year. New launches fell by 56% in NCR Delhi and by 41% in Bengaluru. This has affected the sector badly.

NCR witnessed 6% lower sales at 37,653 units while prices fell by 2% due to a slowdown in demand and the impact of new realty law RERA and GST, said property consultant Knight Frank India. “The year 2017 brought no cheer to the NCR residential market as launches and sales dwindled further due to slow sales velocity and policy initiatives such as Real Estate (Regulation and Development) Act, 2016 and the Goods and Services Tax (GST),” the consultancy firm’s executive director (north), Mudassir Zaidi, said.

The report also pointed out that that the share of affordable homes among new launches rose from 53% in 2016 to 83% in 2017, indicating developers’ focus on properties within the Rs 50 lakh price bracket. The main reason for the launch of affordable housing is the huge demand in the segment and the subsidies under the Prime Minister Awas Yojana.

In fact, if compared to real estate activity in 2010, it is very bad. “By the end of 2017, the residential sector had shrunk to a fraction of its size in less than a decade. Nevertheless the near-standstill triggered by the note ban seems to have tapered with time,” Knight Frank India chairman Shishir Baijal said.

In 2010, India had witnessed the launch of 4.80 lakh apartments; in 2017, the number is 1.03 lakh. At the same time, sales plummeted from 3.61 lakh apartments to 2.28 lakh. Slow sales in the past have led to a huge pileup of unsold units— 5.28 lakh units across India — that would require around three years to be sold completely were no new launches to take place.

However, RERA has provided a silver lining. “Select markets wherein Rera has matured have seen developers re-launch projects at attractive prices, which led to an uptick in sales in 2017. This strategic switch by developers led to a price reduction in most markets. It’s a buyers’ market today and we hope the momentum holds steady in the near future,” Baijal added.