Top 3 myths Busted About impact of Demonetisation on Real Estate
Demonetisation has brought with it a lot of debates, both in favour and against the move. The ongoing chaos has penetrated the real estate sector. 99acres.com attempts to bust the top 3 myths pertaining to the impact of demonetisation on the real estate market
Real estate sector, by virtue of being a big-ticket investment tool, has been one of the most popular instruments to lock cash. India's initiative to fight black money has brought this sector and its dealings under scanner. While the sector is expected to move towards transparency in the long term, it is bearing the brunt at some levels in the short term. Amidst the uproar, the frenzied "common man" has fallen prey to several myths that need to be busted.
Below are the popular ones:
MYTH: Property rates in the secondary market will crash!
REALITY: Though the ban imposed on 80 percent of the currency circulating in the market will impact the cash-driven secondary market, it will not lead to its downfall. In the short-term, demand might suffer, leading to a slight price correction, however, the market will stabilise gradually.
Explaining the same, Sachin Sandhir, Global Managing Director - Emerging Business, RICS says, "Secondary markets would be affected as unaccounted cash payment would no longer take place, leading to a drop in sale of properties in the short-term. However, it will not be surprising to see prices going up in the future as sellers come to terms with the fact that capital gains tax has to be paid on monies. Sellers are likely to factor that liability into the sale price."
MYTH: Real estate is no more a lucrative investment tool!
Reality: This is one of the biggest myths regarding real estate, after demonetisation. In fact, the move is a major step towards eliminating cash transactions in real estate, thus making it more transparent, credible and organised.
Manju Yagnik, Vice Chairperson, Nahar Group opines, 'The demonetisation drive is in pursuant to the policies initiated by the government in bringing more transparency in property dealings, confidence building measures for home buyers and creating a positive environment for the industry at large. Home buyers will now be able to evaluate more realistic pricing of property. It will clear off any uncertainty and increase buyer confidence. Though this may cause inconvenience to people in the short term, it will immensely benefit home buyers and the real estate sector in the long-term.
Myth: Land transactions will suffer the most!
Reality: Land transactions are likely to suffer primarily because there is a lot of cash involved in these deals. However, experts say, not all kind of land transactions are bound to be adversely impacted. Giving an insight, Anuj Puri, Chairman & Country Head, JLL India says, "Land transactions happening in the realm of joint ventures, joint development or corporate divestments will see very little impact of the demonetization move. This is because JVs, JDs and corporate divestments are all quite institutionalized, with little or no cash involvement. However, those carrying out direct land deals will doubtlessly suffer - especially when it comes to agricultural land transactions, which tend to involve significant cash involvement."
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