Impact of Demonetization: Several Real Estate Transactions Put on Hold
Apr 14, 2017 Real Estate News
The central government’s sudden decision to demonetise 500 and 1000 rupee notes has made a stunning impact on several sectors in the country where black money is primarily involved. Real estate, not far behind in terms of use of black money, is suffering several losses since the ban on higher denomination notes was announced.
With the majority of the property transactions dealing in cash, the said ban has brought several real estate deals to a complete halt. Lately, several property developers across all the major cities in the country have been getting requests from their clients to keep their respective deals on hold for now. Moreover, deals wherein there is involvement of 100 percent cash component will have to wait much longer due to the clampdown by the government on black money.
Analysts, however, suggest this scenario involving stuck real estate deals is completely normal given the total ban on existing 500 and 1000 rupee notes. The deals that were structured with the cash component before the ban was announced will not go through. Sellers are even getting requests from the buyers to accept the now banned notes. However, given the government’s will to check unaccounted cash of individuals, sellers are instead interested in receiving the remaining amounts in terms of the cheque. Due to this, many of the deals have even got cancelled due to payment issues.
The lackluster response to property purchases can be justified by the fact that inquiries from consultancy and brokerage firms have dropped by almost 25 percent since the last week. Brokers fear that the government’s demonetization move will repel away several investors and homebuyers from purchasing a property.
These are anxious times for most of the developers across the country. Speculations are rife that the slowdown in the property market will bring real estate prices down by several notches and thus investors are adopting a wait and watch approach.
With the fact that real estate has been already witnessing a slowdown coupled with severe liquidity crunch for well over two years now, the ban on old high denomination notes will only deteriorate the prevailing condition. Since the cash plays a major role in a lot of real estate transactions, the sector is set to witness very low business in the next quarter. Although the primary market won’t have much of a negative impact because of its involvement of end users, the secondary market transactions involving black money is all set to take a big knock as a result of the demonetisation move.
The demonetization of 500 and 1000 rupee notes has already started to bring down property prices with builders ready to give as much as 20 percent discounts in order to get rid of the piled up inventory. Small time developers, generally dealing in cash are certain to endure monetary losses as a result of the ban.
With the majority of the property transactions dealing in cash, the said ban has brought several real estate deals to a complete halt. Lately, several property developers across all the major cities in the country have been getting requests from their clients to keep their respective deals on hold for now. Moreover, deals wherein there is involvement of 100 percent cash component will have to wait much longer due to the clampdown by the government on black money.
Analysts, however, suggest this scenario involving stuck real estate deals is completely normal given the total ban on existing 500 and 1000 rupee notes. The deals that were structured with the cash component before the ban was announced will not go through. Sellers are even getting requests from the buyers to accept the now banned notes. However, given the government’s will to check unaccounted cash of individuals, sellers are instead interested in receiving the remaining amounts in terms of the cheque. Due to this, many of the deals have even got cancelled due to payment issues.
The lackluster response to property purchases can be justified by the fact that inquiries from consultancy and brokerage firms have dropped by almost 25 percent since the last week. Brokers fear that the government’s demonetization move will repel away several investors and homebuyers from purchasing a property.
These are anxious times for most of the developers across the country. Speculations are rife that the slowdown in the property market will bring real estate prices down by several notches and thus investors are adopting a wait and watch approach.
With the fact that real estate has been already witnessing a slowdown coupled with severe liquidity crunch for well over two years now, the ban on old high denomination notes will only deteriorate the prevailing condition. Since the cash plays a major role in a lot of real estate transactions, the sector is set to witness very low business in the next quarter. Although the primary market won’t have much of a negative impact because of its involvement of end users, the secondary market transactions involving black money is all set to take a big knock as a result of the demonetisation move.
The demonetization of 500 and 1000 rupee notes has already started to bring down property prices with builders ready to give as much as 20 percent discounts in order to get rid of the piled up inventory. Small time developers, generally dealing in cash are certain to endure monetary losses as a result of the ban.
