Dev Singhraha
Relocation Expert
Everybody knows how the sale of pre-owned houses and developer-built small properties have come to a standstill the sale of pre-owned houses and developer-built small properties have declined as an effect of demonetisation. The primary reason behind this is the involvement of black money in sale, resale, and purchase of real estate property. In the National Capital Region (NCR) and Mumbai, 35-40 percent of the money involved in the sale of pre-owned houses was in black. Although, markets like Hyderabad and Chennai, which are not so much dependent on high cash transactions, have been less affected.

But there is a silver-lining for those who are planning to buy a new home. It has been informed by some reliable sources that the government is planning to boost an already crippled housing market with the money accumulated from demonetisation. The senior cabinet ministers are in favour of this decision. In fact, they are planning to announce a housing scheme that would provide significant discounts to prevailing home loan rates. 

It is expected that once the demonetisation drive stabilises, that is, within three-four-six months, banks will extend more housing loans at a cheaper rate of interest. Loan rates might as well go down a low as 6-7 percent versus today's average of more than 9 percent.But these lower rates could be restricted to the first time home buyers. And the loan amount would be up to Rs 50 lakh. Although, major realtors are requesting the government to make it 1crore.  

But this is going to happen only after the policy statement is released in December. And the Reserve Bank of India updates the monetary policy on December 7. The new housing scheme may also be discussed in the Union Budget that Finance Minister Arun Jaitley will present on February 1, 2017.

This should be a good move by the government because instead of parking their money in bonds or fixed deposits, people would prefer to buy property in the coming days. Cheaper home loan rates will make housing affordable, lure back buyers, and at the same time rescue builders that are grappling with massive unsold inventory.

Few people are also predicting that the property prices would go down by 25 percent. If the loan rates, as well as the property prices, reduce, real estate market would be recovered, because at present, the sales have gone down as there are fewer transactions following demonetisation.

The most interesting news is deals which had 30 to 40 percent of cash transactions have got cancelled in recent days, while the deals which were based on home loans did not get affected. Therefore, in view of the current trends, the land will begin to come at rationally lower prices as now onwards cash transaction would be minimal. Subsequently, home sales from builders who have operated in the past without cash will substantially increase.
 
As a result, India's GDP will steadily rise as the black money economy has been largely wiped off in the near-term and transactions are getting recorded in the mainstream economy. This would eventually lead to cheaper home loans and car loans and personal loans that would in a way fuel consumer spending capacity.      
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