November 10, 2016
Bengaluru: The sudden ban on 500 and 1000 rupee notes has caught the real estate market by surprise. Though, as Pradeep Mishra of Indiahousing.com was quoted saying, the government was warning the players, trying to curb black money for a long time, but very few read much into it. This move will impact the real estate market adversely. Between 10% and 70% of the value of the property being bought or sold takes place in cash in India. With the current stock of money suddenly worth nothing, troubled projects will drown more into misery. Most analysts have predicted an impact on the luxury section, and the unorganised builders and secondary resale property market. Housing prices may come down owing to demonetization.
DLF CEO Rajeev Talwar was quoted as saying that the move towards a cashless economy is a sign of a maturing economy. It is a step in the right direction. He added, “The black money was mostly in land purchase. But in the last 6-7 years, there has been no major land buying in this sector. Big builders and organised players are already using the bank channel and they would gain from this decision. Unorganised players and the secondary market would be impacted.”
Echoing similar thoughts, Razack, chairman of the Bengaluru-based Prestige Estates, said there could be some impact on the secondary market in big cities but the primary market was largely through banking channels.
Realty gurus are also predicting a downward spiral in prices, which will in turn raise the demand for housing. The affordable housing sector primarily sees a lot of mortgages and therefore the impact there will be less comparatively.
“Projects by Mahaveer and the like will continue with their own business, because their target customers are different from the luxury group. But Mahaveer Group has also entered the luxury segment,” says an insider on condition of anonymity, “though most key players are saying the same thing.” Realty industry body CREDAI President Gitambar Anand said that the primary market will not be impacted but the resale market will feel the pinch. Business all across has had a setback of sorts, not only the realty market. Mr Sridhar Rao of Novopay said, “The move to demonetise Rs. 500 and Rs. 1,000 currency notes had large strategic objectives as explained by the government. However, for businesses there is a clear message that promoting cashless transactions will keep them out of inconveniences and losses when such measures are taken. It is time more and more businesses moved towards making most of their payments through electronic modes instead of cash.”
Most realty players have welcomed this move distancing themselves from the impact. Concorde Group from Bangalore said, “It is too early to make predictions of the impact this would have on the market, we have to wait and watch.”