How does demonization create cashless transactions
How will demonetization affect Indian real estate?
The real estate market mainly affects the resale market in terms of pricing and also demand due to demonization. Resale market will be more affected as they could have bought the property with sky high price and now property price may fall due to the demonstration property in the opinion of the appraiser. This bold move by the Modi government has suddenly cut the supply of cash from the market, so it could help improve transparency in the industry.
Courtesy - freedigitalphotos
Everyone knows there is a lot of black money going into the real estate sector. So, let's look at some of the effects the currency ban could have on Indian real estate. "bajajfinserv" has described some wonderful views, please go through link to read full article.
NEED TO BUY A HOUSE?
The government's decision could wipe out the inflow of black money into the real estate market. This would get rid of cash transactions that are not taken into account. The sector is dealing with significant cash on a daily basis. For example, the sudden withdrawal of higher-level grades can have a short-term impact on the developer. House prices could fall in the near future if demand falls. Most buyers will pay in cash over the next two months. The demonstration movement to curb illegal money could receive support in implementing the real estate law. That means the Indian real estate market could see a significant drop in prices. This could make it easier for regular people to buy a home.
Also read: Surgical Strike On Black Money: This Is How Real Estate Experts Reacts!
IMPACT ON REAL ESTATE:
The decision will have a huge impact on real estate as the sector operates in large amounts of cash. Cash transactions allow developers to save taxes. But there will be a huge impact on ongoing real estate projects with cash. Buyers received to save on stamp duty. People invest in real estate in order to deplete their uncontrolled cash. Now, with fewer potential buyers in the real estate market, the sector could see a near-term slump. The renowned builders and the primary real estate market are unlikely to feel a big pinch. That's because their transactions go through banks. But in the real estate sales market, small and disorganized builders can have a huge impact. That's because their transactions involve higher cash reserves. This can be a positive step for the industry in the long run.
IMPACT PAY ON HOME LOANS:
As more legal cash enters the banking system, the volume of bank deposits increases. Higher deposits would lead to more bank lending. When lending increases, the interest rate can fall. A cut in the repo rate from the Reserve Bank of India last month already brought the home loan interest rate. Now, with the prohibition of parenting comments, credit is likely to get even cheaper.
TRANSPARENCY IN HOME PURCHASING:
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The government's move could be introducing unfair trading practices in real estate by making transactions in unexplainable cash tougher. Cashless transactions would standardize the sector. They would bring more transparency as all transactions would go through banks. With the emerging cashless economy, real estate can go through a major transformation. This would organize the sector more. It would bring transparency, tax rationalization and professionalism. At the same time, it could reduce corruption in the secondary real estate market.
This bold move to contain illegal money could result in a short-term dip in the Indian real estate sector. In the coming months, demand and property prices could fall. However, once the industry has recovered, it could see more transparency and standardization.
Also read: Demonizing Effects on the Indian Real Estate Sector
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