Demonetisation and Real Estate – The Impact

Demonetisation Rs 500 & 1000 notes not legal tender Impact on property buyers: No cash component Transaction value close to guideline value Registrations to take place at transaction value Buyer to account for source of funds used for property purchase Formal bank finance to become the norm Home loan interest rates to drop

Impact on sellers Quoted values to be close to guideline values Capital Gains Tax paid on entire transaction amount Deal to be registered soon after purchase

Primary market – new property Formally funded transactions to continue Demand from professionals to drive sale along economic corridors Builders unlikely to drop prices Completely a buyer’s market – negotiate better for car park, fittings and fixtures Banks to chase serious buyers Best time for end users to buy ready built property

Secondary Market- resale market Cash driven markets like Delhi NCR and parts of Mumbai market slow Prices likely to go down by about 10-15% in about 6 months Sellers likely to negotiate better rates with end users Bank funding available to serious buyers Registrations at actual transaction value Guideline values to become benchmark values Land transactions likely to slow down as cash exits

What will happen to prices Primary markets will remain stable with formally financed deals becoming the norm Secondary markets will settle down 10-15% on exit of cash Speculative prices out. Land prices expected to drop as formal finance replaces cash. Less formal finance available for land purchase Many buyers hold back hoping for lower values Serious buyers to benefit from good negotiations Credit Linked Subsidy Schemes to sweeten the deals for those with less than Rs 50,000/month income for budget housing

Supporting legislations GST - Goods and Services Tax, a comprehensive indirect tax, aims at creating a transparent taxation system. Its enforcement will resonate in all sectors and real estate will also be impacted Prohibition of Benami Property Transactions Act – All property to be bought in the name of the buyer who funds the deal RERA - Consumer, developer, and regulator stands to gain once Real Estate Regulatory Authority Act is implemented in all the states. Transparency will ensure that project specific risk is reduced. This will enhance the buyer- seller relationship positively      

Consumer Perspective No black component in deals Interest rates coming down Lots of ready built stock Values flat for two years and dropping Deals sweetened by sellers

Consumer Voices Builders can not meet their overheads without sale. No more black money to meet their deadlines. So obviously they have to reduce the prices due to competition and fund crunch or else will be eliminated. - Prakash The idea of Rs 2000 goes against the entire cleansing of financial system. Again the same situation will crop in few years. Doubt about the real intention? – VR Ganeshun Why is the new 2000 note re-introduced? what is the rationale behind it? - Nikesh The govt’s decision to curb black money is good. Those hoarding black money, which affects economy are the real estate tycoons, big infra contractors and middle-men who arranged these deals - Sachin Oommen Make all govt office processes online. Avoid multiple taxation, delink politicians from public projects, as they should not decide on who should execute project  - Karthik

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How it impacts you! Real Estate, last bastion of black money, under attack An analysis by E Jayashree Kurup on how demonetisation is going to change Indian real estate.  Demonetisation: What all will be affected? A report on views on impact of demonetisation by Credit Ananlysis & Research Limited (CARE Ratings).  How note ban will make real estate more transparent An analysis by E Jayashree Kurup on how transparency a rare feature in real estate is going to be common.

Why you should use demonetisation opportunity to buy now Is this the right time to buy a property? E Jayashree Kurup makes a detailed analysis. How currency ban can change real estate A report on the efforts of present government to make a better and brighter economy. Property registrations dip 37% since demonetisation The number is dropping due to cash crunch, the inspector general of registration and controller of stamps says. Demonetisation of currency notes: Impact on real estate Real estate is going to be affected in many different ways, the report explains.

How it impacts developers Currency ban: Input cost of developers may increase How is the developer community going to change after demonetisation? A report. Next 3 months is going to be disruptive for real estate Niranjan Hiranandani, Managing Director, Hiranandani Group, talks about the importance of black money crackdown on the market. Massive deposit bonanza for banks pulls down interest rates A report conforming that the money flooding into banks has resulted in such a massive bonanza that it’s pulling rates down.