The real estate industry is already feeling the pinch of Modi’s demonetisation move against black money. City-based developers, who did some good business during the festive season, have seen 60 per cent cancellations on the Deepawali bookings.
Venkatesh Reddy, a real estate dealer who has an office in HSR Layout, said: “We got good response during Deepawali compared with last year. Most people who came to check out flats paid a lump sum booking amount. But soon after the announcement, I have been getting calls for cancellation. Many don’t even mind losing the booking amount.” A senior government official from the registrar office told media: “There is a group that invests with hard cash. Most of these real estate buyers are in the business of lending money and charge high interest rates. This group is in mourning.”
The city has been a preferred destination for investments in residential real estate as the prices of new inventories are lower compared with the saturated markets of Mumbai and National Capital Region (NCR). Despite this, in the last two quarters, this sector was troubled over unsold inventories rising out of a gap in demand and supply. Demonetisation would only add to the woes.
Shrinivas Rao, chief executive officer, Vestian Global Asia-Pacific, said, “It won’t affect the big realtors much.” That said, the smaller players make up 15-20 per cent of the market, and around 40 per cent of the stock in residential real estate, locally, is controlled by them. This involves a substantial amount of cash transaction, Rao explained.
“The city already has a stock of more than 1 lakh unsold residential inventories. This, coupled with demonetisation, will obviously lead to a drop in the value and a correction of price will happen in the next 18 months with real estate value expected to plummet 15-20 per cent,” he said.
The commercial real estate section, meanwhile, has been doing great and will likely witness a positive growth. There will be minimum impact on office and industrial leasing and transactions business, given that cash components don’t play a significant role in such transactions, said Anuj Puri, chairman and country head, JLL India.
Real estate players, however, have stayed positive in their acceptance of the new order. Shivaram Kumar Malakala, co-founder and director of Habitat Ventures said the government’s decision would have medium to long-term positive impact, even though he expected some short-term glitches in the industry.
The real estate sector will definitely be affected by the demonetisation exercise, as it has traditionally seen very high involvement of black money and cash transactions. Such incidences have been in the secondary sales market, where cash components have traditionally been a veritable ‘must’. In other words, the resale properties segment will take a big hit.
“However, short-term pain is inevitable when we look for any eventual long-term cure for the disease. There has been, for long, a strident demand for transparency in the sector so that it becomes more organised, and cash dealings must necessarily be the first symptom of the disease to be dealt with,” said Ashwinder Raj Singh, CEO, residential services, JLL India.
Experts in unison said the impact will be felt across board with tier-II and tier-III markets taking a bigger hit. But with the Real Estate Regulatory Authority (RERA), Goods and Services Tax (GST), the Benami Act, and now this recent move, the real estate sector can expect a positive transformation ahead.
Shishir Baijal, chairman and managing director, Knight Frank India, said: “The broader effects of this move will help the sector grow in the long run. Firstly, it will create a level playing field among all stakeholders. Institutional funding to developers, which until now came with a higher risk weightage, is bound to see some softening with the increased transparency.
Rs 100, Rs 50 won’t be demonetised
Seeking to dispel rumours making the rounds, the Centre on Wednesday said there is no intention to demonetise Rs 100 and Rs 50 notes. In a series of tweets, the government described as “myth” a rumour that the prime minister will again address the nation to declare Rs 50/100 as invalid currency. “Baseless; no intention of cancelling legal tender status of notes of any other denomination,” PIB said in a tweet. It also described as “myth” the contention that cost of demonetisation is more than the benefits. There is no intention to seal bank lockers and freeze gold and diamond jewellery. On complaints that Rs 2,000 notes are of poor quality and colour comes off, the government said there is no need to worry as this is a security feature.
No holiday for banks today
All banks in the state will remain open on Thursday. Though it is a declared holiday on account of Kanakadasa Jayanti, the state government issued a notification, stating that banks must remain open. The move comes as a big boon to public which has been struggling to exchange or deposit notes following the Centre’s move to demonetise Rs 500 and Rs 1,000 notes.
Credits Bangalore Mirror