While the nation is still coming to terms with the Government declaration of demonetisation of cash notes of Rs 500 and Rs 1,000 We analyses what this decision means for the real estate market..
Unaccounted money, popularly known as black money, has been a major cause for concern in the Indian economy for quite a while. Since the real estate sector is accepted to be an unmistakable conductor for such funds, the recent demonetisation of Rs 500 and Rs 1,000 notes is expected to significantly impact this sector.
The role of cash in real estate transactions:
# Real estate is a major sector, where black money is parked.
# The lack of a standardised and transparent mechanisms for property valuations, make cash transactions a reality, in this sector.
# Anomalies in circle rates, also encourage the flow of cash in real estate transactions.
# Secondary market transactions, generally have a higher cash component, to save on stamp duty costs.
Industry experts are unanimous in their belief that this move will augur well for the real estate market in the long run. This choice is an enormously positive stride for the Indian real estate industry, the impacts of which are relied upon to be extensive and quick. While this sudden nullification of higher cash notes will shake up the segment significantly, it in without a doubt a stage in the right bearing.
Short term adverse effects
A change of this extent will undoubtedly confront some underlying hiccups and this may convert into less exchanges in the property market, especially the resale market, which has the most noteworthy contribution of money segment. Level II and III markets are likewise going to be seriously affected in the short keep running as money exchanges here frame a noteworthy lump of property deals, taking up as much as 70 percent of the exchange esteem sometimes. The luxury housing market is likewise liable to confront a noteworthy brunt of this sudden change since it is accepted to be prominent among those holding black money. This choice additionally comes as a noteworthy hit to other first-class buys, for example, land assets, which have a tendency to draw in huge money exchanges.
End of corruption in real estate
The biggest advantage of the demonetisation of higher cash notes is that it will eliminate black money to large extent in the nation. By cutting the flow of black money into real estate, this move will cut down corruption in the sector. The exchanges which went unaccounted due to being managed in real money will now go under the government scanner . Gera includes that stringent policies will guarantee that corruption stays under control in the long haul too.
Enhanced transparency
The effect of this move is expected to be huge in the business sectors where money payment is the standard. This move will advance cashless economy and therefore, will bring transparency in the segment, especially in purchase of lands. It will likewise put a keep an eye on the norganised developers and the here now gone again later players who tend to dupe people through unaccounted transactions. This is probably going to work couple with alternate strides being taken by the government, for example, the Real Estate Act and will most likely benefit the transparency of the sector.
Greater foreign investment
Stricter measures against black money will give the Indian real estate industry upgraded validity and enhance the general monetary assumption. Enhanced market tranparency and a positive government attitude about policy reforms will play a major part in attracting greater foreign investment into the realty sector.
Realistic price points
Another major impact of this decision will be a descending push on property prices, including land. This stems from the expectation that investors will now be not able to convey their unaccounted funds in real estate, which in turn will compel developers to set lower costs. Experts suggest that value redresses of around 10 to 30 percent may happen depending upon the market. The deflationary impact in general and more specifically on real estate prices will be a boon for affordable home prices. While the immediate market sentiment might be a little uncertain due to the suddenness of this move, experts are confident that the future holds great promise for the real estate sector.