Demonetisation: Builders and home buyers welcome the move

Developer bodies and home buyers have welcomed the government’s decision to ban Rs 500 and Rs 1000 notes, with the former hoping that interest rates will further come down and make it affordable for home buyers to purchase a house. Parveen Jai, president, Naredco has said that it is a “positive move and will help keep a check on the illegal black money movement. As for affordable and mid-housing segment, these will not be affected since these transactions are primarily routed through bank borrowings.”
The organised part of real estate sector will not be impacted. “It is only the unorganised fly-by-night players who will be affected. This move will help the sector fight more effectively for removal of section 43CA of the IT act as now there is no reason to charge tax on so-called deemed income on both buyers and sellers post this move,” says Getamber Anand, president, Credai.
The body also expects that in the coming months repo rates will go down by at least 2% and that home loan rates will come down to at least 7%.
“We expect that the RBI would definitely in the coming months, reduce repo rates by at least 2% so that a home loan can be brought down to at least 7%. The home loan rates coming down to such levels of sub 7% in the next year or so, the atmosphere will become more like the west where home loans are available at 5% and below.
Unlike western countries, India has a documented shortage of housing and homes, an aggressive domestic demand for real estate. This essentially means that in presence of a lower home loan interest regime, a larger pool of home buyers will be able to avail loans to buy the home they always wanted. This could be made possible in as soon as the next six to twelve months. Housing industry will start to grow at a rapid pace while concurrently being in compliance with transparency and fair practices like RERA,” says Anand.
Home buyers too have welcomed the move. “It will help weed out ‘the ratio’ between black and white component which is used to make payment for properties. The impact on real estate prices is obvious. The move will make prices more affordable and do away with unrealistic pricing that dominates the market today,” says Abhay Upadhyay, national convenor, Fight For RERA.
Property valuers, however, are of the opinion that the move will lead to prices going up in the long term. “With time, it will not be surprising to see prices go up 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,” says Sachin Sandhir, global managing ­director – emerging business, RICS.
The land purchase process earlier had the owner entering into an agreement with a builder where part of the payment was unaccounted. Now, since the owner can no longer do that – he would either sit out on the land, stalling the entire development project, or charge a premium to maintain the same cash margins after tax. This may increase the input cost for developers impacting realty prices.

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