How The Real Estate Sector Will Be Affected By The Demonetization Of INR 500/1000
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Millions of Indians were shocked by PM Narendra Modi’s midnight announcement on banning Rs.500 and Rs.1000 notes.The news diverted all the attention from US Presidential election results to Modi’s big move against black money.The government's decision is expected to demoralize the real estate sector the most as it deals with a lot of cash flow on day to day basis.On the other hand, it will also encourage organized and professional developers who are favoring cheque payments growing further.
Three Real Estate experts share their predictions on how the ban will affect the market.
A Win-Win Situation For Developers And Home Buyers
Ashwin Sheth, CMD, Sheth Corp declared it a courageous move that will help bring transparency in the Real Estate sector.
“The real estate sector is in a revival mode and already the implementation of RERA has brought a lot of confidence amongst the buyers. Investments made with unaccounted wealth will be eradicated bringing transparency in the sector,” he said.
Sheth believes, this move will now help to curb many inconsistencies and unfair trade practices bringing professionalism in the sector.
"Reputed builders would not feel the pinch as they have been making use of bank channels for transactions. With the RERA Act and the demonetization of the 500 and 1000 currency notes, we can expect to witness positive reforms and sales growth in the affordable housing sector. This is a win-win situation for developers and home buyers”, he added .
Demonetization Will Keep The Real Estate Prices Up
Sachin Sandhir, Global Managing Director – Emerging Business, RICS said that it will not be surprising to see real estate prices go up in the market.
“ Secondary markets would be affected as unaccounted cash payment would no longer take place leading to some dips in the sale process for assets that are sold or purchased in the short term. However, with the progress of time, it will not be surprising to see prices go up as sellers come to terms with the fact that capital gains tax has to be paid on monies. Sellers are likely to factor that liability into the sale price," he said
He also further added that a closer look at the primary market would indicate that there are several components of informality within the production chain .
A Call For Professionalism In The Real Estate Sector
Mr. Munish Doshi, MD, Acme Group feels this is a big leap forward for a truly digital and modern economy to emerge, given that housing sector itself contributes 5-6% of India’s GDP.
"The professional realtors have anyways been selling property in cheque payment only for more than a decade now. If anything, this move will bring in more professionalism and organization in the sector," he said.
"It is encouraging. However, in all, the organized Developers affiliated with MCHI-CREDAI will benefit in long run – although there will be little hurdles in the sentiment of flat buyers in short run – in long term for the Real Estate Industry, this is a welcome move.Even The Real Estate valuations will also see a correction now,” Doshi added.