A STUDY ON IMPACT OF DEMONETISATION ON REAL ESTATE MARKET
Loading...
Files
Date
2017-08-10T11:06:41Z
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
Most of India's business environment has been tremendously shaken up by the recent
demonetization of the higher currency notes by the Modi government. This is the third
demonetization exercise undertaken by the Indian authorities, if we include the one done just
before independence in 1946. It is still too early to accurately gauge the depth of the shakeup this
has caused, but its impact on the real estate sector is immediately visible.
Since Modi's surprise announcement, the ripples have been spreading through the already
disturbed sector, which has been experiencing excruciatingly slow growth in recent times.
Poor sales leading to almost flat prices, heavy liquidity challenges and high unsold inventory
have all colluded to keep real estate sector away from fulfilling its potential - and provide
necessary residential stability to average citizens.
UNDENIABLE IMPACT ON REAL ESTATE
The real estate sector will definitely be affected by the demonetization exercise, as it has
traditionally seen a very high involvement of black money and cash transactions.
However, almost all such incidences have been in the secondary sales market, where cash
components have traditionally been a veritable 'must'. In other words, the resale properties
segment will take a big hit.
However, short-term pain is inevitable when we look for any eventual long-term cure for the
disease. There has for long been a strident demand to bring transparency in the sector so that the
it becomes more organized, and cash dealings must necessarily be the first symptom of the
disease to be dealt with.
The luxury and high-end segments of residential real estate will also see a major impact from this
exercise, since it is another area which has seen a lot of payments done in cash. The legal
banking/financing channels have accounted for only a small part of all transactions in this space.
The demonetization move is likely to result in luxury property prices dipping by as much as 25-
30% as sellers struggle to offload properties to generate liquidity. This means that luxury home
buyers will suddenly have a much wider bandwidth of options to choose from.
Description
Keywords
KISHORE R, 1NZ15MBA30