Demonetisation Gives a Much Needed Boost to Affordable Housing
May 17, 2017 Home Trading Steps
We all know that Rs 500 and Rs 1000 notes ceased to exist as legal tender from November 9 this year. This demonetisation has put the country, especially the real estate sector in a state of mayhem and shock.
Courtesy this decision taken by our revered Prime Minister to put a check on black money and circulation of fake notes, the entire machinery of real estate’s monetary transaction has to go through an overhaul. Henceforth, those who are dealing in cash will be unable to pay in the old currency notes and those with undeclared sources of income would fear to pay entirely in white as that will carry a risk of attracting the I-T department’s scrutiny. Therefore, land prices will fall in the next few years, especially in far-flung areas around Indian metros, and the tier-II, III cities.
However, land prices in the areas within metropolitan limits will not be affected. It is so because devaluation of land is unlikely to happen in these areas, due to their high-demand and low-supply scenario.
But the fringes will feel the pinch after a year or so. The reason for this is that most of these areas are agricultural lands and property transactions in these areas involve a lot of cash component. This will lead to the easing of land prices in these areas. And with that, ticket sizes of apartments are also expected to come down. This will, in turn, make the house prices more affordable, that would make many salaried home buyers invest in real estate in a market that is driven largely by end users and not speculative investors.
Well, the good news is that housing will become more affordable in the following zones:
Places located away from the city centres and which have seen a lot of housing supply in recent years. There is a high possibility of prices softening in such sub-markets. For example Vasai-Virar, Palghar, Kalyan-Dombivli, Shilphata and upcoming locations around Panvel in the Mumbai metropolitan region have a lot of supply.
The impact of demonetization has been way higher in Tier-II and III cities, especially those driven by business communities, such as Jaipur, Surat, Indore, etc. it is expected that certain projects in Kolkata’s northern sub-market may witness price reduction in the next three-four quarters. Easing of prices will be seen in the next one year vacant land in the north of Kolkata, along with BT Road (outside its municipal limits).
Locations in the outskirts of Hyderabad like Uppal, LB Nagar, Shamirpet, in the eastern sub-market has more plotted developments and row houses than residential apartments. That makes the cash component in transactions is also relatively higher. Moreover, due to consistent delays in the metro project, there is a possibility of price correction here.
Not only these, but other cities also have good residential areas in the fringes. But one will have to keep a close eye on these places over the next six-twelve months to understand by when, and what margin, the prices there will soften and local demand-supply dynamics could bring about a change in some of these areas.
Courtesy this decision taken by our revered Prime Minister to put a check on black money and circulation of fake notes, the entire machinery of real estate’s monetary transaction has to go through an overhaul. Henceforth, those who are dealing in cash will be unable to pay in the old currency notes and those with undeclared sources of income would fear to pay entirely in white as that will carry a risk of attracting the I-T department’s scrutiny. Therefore, land prices will fall in the next few years, especially in far-flung areas around Indian metros, and the tier-II, III cities.
However, land prices in the areas within metropolitan limits will not be affected. It is so because devaluation of land is unlikely to happen in these areas, due to their high-demand and low-supply scenario.
But the fringes will feel the pinch after a year or so. The reason for this is that most of these areas are agricultural lands and property transactions in these areas involve a lot of cash component. This will lead to the easing of land prices in these areas. And with that, ticket sizes of apartments are also expected to come down. This will, in turn, make the house prices more affordable, that would make many salaried home buyers invest in real estate in a market that is driven largely by end users and not speculative investors.
Well, the good news is that housing will become more affordable in the following zones:
Places located away from the city centres and which have seen a lot of housing supply in recent years. There is a high possibility of prices softening in such sub-markets. For example Vasai-Virar, Palghar, Kalyan-Dombivli, Shilphata and upcoming locations around Panvel in the Mumbai metropolitan region have a lot of supply.
The impact of demonetization has been way higher in Tier-II and III cities, especially those driven by business communities, such as Jaipur, Surat, Indore, etc. it is expected that certain projects in Kolkata’s northern sub-market may witness price reduction in the next three-four quarters. Easing of prices will be seen in the next one year vacant land in the north of Kolkata, along with BT Road (outside its municipal limits).
Locations in the outskirts of Hyderabad like Uppal, LB Nagar, Shamirpet, in the eastern sub-market has more plotted developments and row houses than residential apartments. That makes the cash component in transactions is also relatively higher. Moreover, due to consistent delays in the metro project, there is a possibility of price correction here.
Not only these, but other cities also have good residential areas in the fringes. But one will have to keep a close eye on these places over the next six-twelve months to understand by when, and what margin, the prices there will soften and local demand-supply dynamics could bring about a change in some of these areas.
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