The government’s decision to ban Rs 500 and Rs 1,000 currency notes will hit the real estate sector hardest. While the move is welcomed by many industry experts. and curb down black money involvement, the decision will come out as a major relief for the end buyers and property aspirants…
Prime Minister Narendra Modi’s ban on the old Rs 500 and 1000 bank notes is regarded as a fresh “surgical strike” on the black money market. While most of the businesses are going suffer a momentary hit for the next 72 hours, the real estate and property sector seem to take a long-term hard hit by this decision.
As a usual practice, the property market is mostly encouraged by involvement of heavy cash dealings; almost 30% of the transaction, which will straight forward attract a similar proportion of downfall by the government’s latest revelation.
Of the property markets, Delhi-National Capital Region is known for the highest dealing of cash, making it to suffer the most.
The decision is expected to make things difficult for developers and they will go slow on construction without the free-flowing cash around them. Many investors in new and existing projects will pull back their hands, which will delay the completion time and final possession of the property, even few of the projects may get stuck. On the other hand, those who are eyeing for “ready-to-move” avenues will be in a better position to negotiate on the prices.
Similarly, land prices are also going to witness a downward push, as cash-loving investors will not be able to deploy their cash any further. In addition, in the coming time, builders will also accept only cheques. As a result, they will be forced to lower property prices. Soon, the buyers are going to be offered a better, corrected price of the properties.
This is not going to be the case only in tier – I cities like Delhi-NCR, Mumbai, or Kolkata; the tier – II and III cities are expected to be worst affected by the move. The market will see a shift of interest from the costly up-markets to these affordable options. As a result of combined impact on the prices, he demand for property is likely to grow.
Finally, the PM’s move to bring transparency in the overall economic scenario in the country has proved to be a boon, making homes affordable for end users. To summarise the impact of demonetization of Rs 500 and 1000 banks on the real estate and property market, here are a few key points:
- A lot of money will get into the banking systems
- Black money and cash involvement will remarkably controlled
- This decision will help institutionalise the real estate sector
- Listed and organised players will not be affected
- There will downward pressure on prices that will boost property demand