Demonetization will Reduce Property and Lending Rates
May 17, 2017 Home Trading Steps
More than three weeks have passed since the government announced the demonetization of 500 and 1000 rupee notes aimed at curbing the use of black money in the country. Although this bold move by the government has invited several troubles and losses to various business sectors in India, it is expected to provide long term benefits in the future. The ban on old higher denomination notes is only going to push people to indulge in legitimate transactions, thereby improving the economics of the country.
Demonetization is expected to have a great impact on the Indian realty sector. While most of the transactions in real estate do involve cash component, the ban on 500 and 1000 rupee notes is aimed at stopping this menace of illegitimate funds in property business. As a result, many ongoing property deals have come to a halt and builders might have to suffer losses due to piled up inventory.
For more than two years now real estate has been witnessing a slowdown. High property prices coupled with even high home loan rates have been keeping people away from buying a property. However, demonetization has now come as a relief for all the potential home buyers out there. As the piled up black money in old 500 and 1000 rupee notes is no longer a legal tender, property transactions have taken a big hit and therefore developers across major metros are now giving hefty discounts on unsold flats.
The involvement of black money in real estate was so deep that it constituted of around 40 percent of the total property value. Registration of the properties used to be done on the circle rates while the remaining amount used to be transacted in black. For service class people, who generally rely on home loans to finance the purchase of a home, this used to be a deal breaker. Hence, the reduction in property prices will certainly fulfill their interests.
Experts believe once the demonetization drive stabilizes, it will only bring more business to the real estate. Banks are speculated to provide more home loans with reduced interest rates in the coming months. Major banks including SBI and ICICI have already reduced interest rates on home loans.
Since the government’s announcement of banning 500 and 1000 rupee notes, more than 5 lakh rupees worth of cash has been deposited in all the banks in the country. This increase in deposits has given banks more maneuverability in sanctioning loans and credits. RBI is expected to review the monetary policy on 7th of December and based on that banks are expected to lower lending rates by up to 25 basis points.
The business in the primary market, which generally involves white money, is speculated to go up due to demonetization. As banks will now be willing to give more loans, people associated in this sector are hoping for the conditions to improve. However, it is the secondary market which will suffer due to the vast dependency on black money in such property transactions.
Reduced property prices coupled with banks lowering their lending rates will certainly bring cheer to the potential home buyers in the country.
Demonetization is expected to have a great impact on the Indian realty sector. While most of the transactions in real estate do involve cash component, the ban on 500 and 1000 rupee notes is aimed at stopping this menace of illegitimate funds in property business. As a result, many ongoing property deals have come to a halt and builders might have to suffer losses due to piled up inventory.
For more than two years now real estate has been witnessing a slowdown. High property prices coupled with even high home loan rates have been keeping people away from buying a property. However, demonetization has now come as a relief for all the potential home buyers out there. As the piled up black money in old 500 and 1000 rupee notes is no longer a legal tender, property transactions have taken a big hit and therefore developers across major metros are now giving hefty discounts on unsold flats.
The involvement of black money in real estate was so deep that it constituted of around 40 percent of the total property value. Registration of the properties used to be done on the circle rates while the remaining amount used to be transacted in black. For service class people, who generally rely on home loans to finance the purchase of a home, this used to be a deal breaker. Hence, the reduction in property prices will certainly fulfill their interests.
Experts believe once the demonetization drive stabilizes, it will only bring more business to the real estate. Banks are speculated to provide more home loans with reduced interest rates in the coming months. Major banks including SBI and ICICI have already reduced interest rates on home loans.
Since the government’s announcement of banning 500 and 1000 rupee notes, more than 5 lakh rupees worth of cash has been deposited in all the banks in the country. This increase in deposits has given banks more maneuverability in sanctioning loans and credits. RBI is expected to review the monetary policy on 7th of December and based on that banks are expected to lower lending rates by up to 25 basis points.
The business in the primary market, which generally involves white money, is speculated to go up due to demonetization. As banks will now be willing to give more loans, people associated in this sector are hoping for the conditions to improve. However, it is the secondary market which will suffer due to the vast dependency on black money in such property transactions.
Reduced property prices coupled with banks lowering their lending rates will certainly bring cheer to the potential home buyers in the country.
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