Why is Note Ban a blessing for the real estate sector in India

By : 360 Realtors

22 January, 2018

Although demonetization had slowed down the growth of the real estate industry in India, it has been a blessing for the sector. The combined effect of GST and RERA is likely to bring back the industry back to health. Experts predict that in the medium to long-term span, the real estate sector will benefit from the note ban.

Well, the real estate sector has been a key source of consuming as well as producing black money. At various levels the cash component within the real estate sector has been evident, starting from land transactions where the percentage varies from 30% to 50%. In the luxury housing sector too, the returns are quite high. Even in secondary market transactions, the cash consumption has been as high as 30%. Moreover, the developers lure the buyers by imposing attractive discounts on high-value properties.

With the inception of RERA, new policies in the real estate sector in the country are coming into play. This ensures that the transactions will become more transparent and the investors will get more confidence in the deals. In the pre-RERA period, cash payouts were involved even before the projects were launched, leading to an artificial hike in the prices of apartments. As a result, the homes remained out of the financial reach of the common masses.

Well, after One Year of Note Ban, it is evident that demonetization has reduced these corrupt practices to a large extent. Moreover, the government has formulated policies to check ‘Benami’ transactions. Various legalization actions, including curbs on the cash transactions, have been undertaken to bring transparency in the process. As a result of demonetization, the liquidity was affected in the capital-intensive real estate sector. As a result, the crisis of cash crunch was evident in the real estate sector in India. Besides, the delivery of projects has undergone delays and buyers were deterred from purchasing the properties.

The real estate markets in Mumbai and NCR regions were badly affected. These are investor-driven markets, unlike the ones in Chennai and Bangalore, which are driven by users. Demonetization greatly affected the premium and luxury segment of residential properties.

However, experts state that demonetization will leave behind no long-term effects. They are of the opinion that developers who work in a corruption-free manner have not been affected by demonetization. It is evident that the India Real Estate industry is likely to be more transparent and investor-friendly with new government policies coming into effect. Evidently, demonetization has been a blessing to the Indian real estate sector.