New Delhi: Property market was the economy's underbelly this year and demonetisation towards the fag end only made it more isolated. But things might change in 2017 as builders are pinning their hopes on lower interest rate and transparency for the sector to come back to life.


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The realty space remained weak even this year as housing sales fell on low demand and adverse impact of junking of old cash, but developers expect recovery from the second half of 2017.


The multi-year slowdown, however, did not deter investment as cash-starved developers raised Rs 48,300 crore in 2016 from private equity (PE) investors to fund their projects, up 53 percent from last year's, according to property consultant Cushman & Wakefield.


"Housing sales were better this year before note ban. But sales have slowed in the last two months. We feel that 2017 will be a golden year for the developers in the primary market as they will benefit from the government's demonetisation move and a likely fall in interest rates on home loans," realtors' apex body CREDAI President Getamber Anand told PTI.


DLF's CEO Rajeev Talwar said: "There has been a lot of cleansing in the real estate sector this year. So, 2017 will be a good year for primary product suppliers of real estate."


He said housing prices would remain stable in the primary market, but decline in the secondary (resale) one.


Housing sales did rise in the first three quarters of 2016 on positives like tax sops in the budget, new real estate regulatory law and easing of interest rate by about 1 per cent, but transactions dried up post demonetisation, dragging the overall numbers down for 2016.


According to property consultant JLL India, housing sales in primary market stood at 1.2 lakh units in the seven cities during January-September 2016 as against 1.19 lakh in the year-ago period. Total units sold in 2015 were 1,57,800.


"2016 overall was a watershed year for Indian real estate, with RERA (real estate regulation Act), demonetisation and the Benami Properties Act impacting sentiment negatively. The momentum in 2016 housing sales was lower than 2015 and 2014. Prices remained stable," JLL India Chairman and Country Head Anuj Puri told PTI.


However, he exuded confidence in a market revival in 2017.


"In 2017, we will see consolidation within this industry, with financially disciplined developers having focus on buyers and delivery of projects doing well and the others falling by the wayside. In housing, we will see confidence coming back among buyers with implementation of RERA," he added.


Demonetisation, coupled with the introduction of the real estate regulation Act, could create significant short-term uncertainty, Godrej Properties MD and CEO Pirojsha Godrej said, but added that same factors will lead to consolidation and improved governance in the sector, which in turn will drive consumer confidence.


"2017 will be a transition year where the realty sector starts the year with relatively soft demand, but ends the year very strongly as the benefits of lower interest rates, better affordability and far improved governance lead to a significant surge in demand," he said further.


The year began on a good note as the government offered tax sops in the budget to boost housing demand and announced an additional Rs 50,000 deduction on interest on loans for first-time home buyers and full deduction for profit on development of affordable housing. It also exempted REITs (Real Estate Investment Trusts) from the dividend distribution tax.


Later in March, Parliament passed the Real Estate (Regulation and Development) Act, which is expected to herald the much-needed transparency and accountability in the sector once implemented fully across the country by April 2017. Rules under this Act have been framed while Union Territories and a few states have already implemented this new law.


"2016 began on a promising note for the residential real estate sector as compared to 2015. While 2015 saw sales at 2,66,973 units, 2016 saw 1,35,016 units being sold in the first half itself," Knight Frank Chief Economist and National Director -Research Samantak Das said.


"This coupled with factors like the political stability, regulatory environment, enhanced infrastructure, strong investments, approval to the GST Bill and amendments to REITs led to belief that the real estate industry is coming out of the woods. However, looking at the turn of events, the year is not expected to end on a healthy note."


The scrapping of old notes created a real dent in the real estate industry and pulled down the last quarter trend of residential sales substantially across cities and consequently, sales were at a historical low, he added.


Cushman & Wakefield India MD Anshul Jain said: "With buyer sentiment already low, the recent demonetisation by the government has further dampened sentiment of homebuyers."


Jain expects it to be a short-term phase. "For 2017, we expect that a lowering in home loan rates from banks and some rationalisation in prices would be essential in setting the expectations right between developers and homebuyers," he added.


Unlike housing, the commercial segment saw decent performance during this year in terms of leasing activity.


Net absorption of office space is expected to fall to 34.2 million sq ft in 2016 against 36.6 million sq ft in 2015 due to reduced supply of quality assets. In retail real estate, the pan-India net absorption in 2016 is expected to be 3.4 million sq ft compared with 3.3 million sq ft in 2015, JLL said.


In spite of demand slowdown, 2016 saw big-ticket deals and huge funds inflows from investors.


Essar sold its business park in Mumbai to RMZ Corp for Rs 2,400 crore while India's largest realty firm DLF exited cinema business by selling DT Cinemas for about Rs 500 crore.


Dubai-based Emaar Properties also announced demerger of its India JV Emaar MGF.


Tata Housing and Australia's private equity firm Macquarie set up a Rs 2,000-crore fund to develop luxury homes. Godrej Properties also established second fund with a corpus of USD 275 million in partnership with the Netherlands' APG.


Lots of action were seen in online realty space. While CommonFloor.Com got merged with Quikr, the Reliance Group invested USD 12 million in realty brokerage firm Square Yards.


Despite big investments, the news of delay in delivery of projects, the consequent buyers' protest and complaints in various courts kept coming in throughout the year, especially in the national capital region.