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Impact of demonetisation on real-estate

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Effect of demonetisation on real-estate

Demonetization effect in real estate has come and the effect can be seen as per said by top research team like JLL. It is best time for home buyers to fulfill their dream.

Impact of demonetisation on real-estate:

The impact of demonetisation is expected as follows by few experts;

1)The current demonetisation will make it extremely difficult for any buyer to pay in cash. The seller will also not accept such money. This will automatically bring down property prices.

2)At the initial stage of the real estate project, land purchase has the highest component (40 per cent or more) of unaccounted money. There is a cash component of 20-30 per cent in property transactions, largely due to the difference between the collectorate rate and market rate of property. Demonetization will effect this.

3)Will lead to correction of real-estate prices in market where investment was done through black money.

4)Real-estate sector in India constitutes almost 11 per cent of the GDP, and accounts for more than 50 per cent of the current black money market. Freeing of this money will give a rise in GDP.

5)Urban Land Ceiling Act, coupled with foreign investments and tax holidays had made people buy properties in bulk and then sell it in higher prices which lead to property inflation. This won’t be the case any longer.

6)No registration records were maintained even for larger properties. This will change now that the investments would be legal.

In the last couple of years, the government has initiated a number of key reforms in the real estate sector like Real Estate Regulation Act (RERA), GST, REITs and Benami Transactions (Prohibition) Amendment Act, 2016, besides reforms related to FDI, to bring in transparency. With this step, real-estate sector will become more efficient, evolved, corporatised, fair and transparent in long-term.

Anuj Puri, chairman and country head of JLL India, earlier wrote about the impact of GST and demonetization on the Indian real estate sector.  

Here’s what he stated with regards to residential real estate.

The primary sales segment is largely influenced by home finance players, and deals tend to be facilitated in a transparent manner. This segment will therefore see at best a limited impact in the larger cities, though some tier 2 and tier 3 cities where cash components have been a factor even in primary sales will see a business crunch. The secondary or resale market will, however, certainly be impacted, given the fact that this segment does see the involvement of cash component.

The Real Estate (Regulation and Development) Bill has been passed by both houses of parliament and once it receives the assent of the President, the section dealing with setting up of the regulatory authorities in the states within one year will be notified first.
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