PANAJI: The real estate sector welcomed the Union government’s decision to put the brakes on black money and confirmed that the move would go a long way in cleaning up the real estate industry. Pointing out that the real estate sector is often identified with black money, CREDAI vice-president Pune Rohit Gera said that the demonetization move would weed out unscrupulous real estate developers.
How does the real estate sector view the move to demonetize high-denomination notes?
I think it is a fabulous move. Most cash goes into buying land or for corruption. I don’t believe that organized developers out of choice want to engage in black money. Once you have grown to a professional organization, the disruption that takes place for your business with tax queries is just too much, so professional developers should and will welcome this.
What impact do you see on the real estate sector?
People are certainly looking at deferring their purchase decisions because of the uncertainty and there is uncertainty as far as the real estate sector is concerned. But I think this is temporary. It is going to affect people who are used to dealing with cash.
How long do you expect customers to stay away from the market?
Do you foresee a drop in prices in the real estate sector?
There is going to be pressure to drop prices and there will be pressure on prices to rise. There is a tug-of-war taking place. In the medium term, prices will rise. For three years prices have not risen and actually fallen and in real terms, prices are down substantially. If you factor that in, where is the room for prices to go down?
Land costs you between 30-50% of your selling price. Taxes today is nearly 35% and 25% is construction cost and the remaining is your profit. Land and Tax accounts for 60-80% of the costs and unless these two come down, how are you going to bring prices down?
What percentage of Goa’s real estate sector functions on black money? What will be the impact on this segment?
I don’t think more than 15-20% of the purchases are in cash. There are developers and I will not call them developers but fly-by-night operators who build buildings without approvals, without permissions, without paying the corporations and sell most of it in cash. These operators must get weeded out or they must become regular professionals and enter the formal sector. Those who thrive in the cash economy, they are gone for one-and-a-half years.
What should someone, looking for a first home, do in this market?
There is tremendous demand at the bottom of the pyramid. Do a thorough check on the developer’s track record. Go and see if work is on at the site and if it is in its early stage. Get the papers checked yourself. If the project has progressed and there is unsold inventory then logic says that something is going to happen. If the project is in its early stage but mostly sold, and has a good track record, go ahead.
Goa is known as a second home destination or an investment destination. Will this change?
The second home market is likely to see some drop and it will take some time to settle down.
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