Effect of Demonetization on Realty

Owning a house is the pipe dream of millions of people from all walks of life. But demonization which happened in India last year has a significant impact on the real estate sector. Here are some of the major ways in which demonetization effected the realty sector in India:-

Inflow of black money has been checked

In the past, there was a steady of black money into the real estate market, which was invested in the construction of both residential and construction projects. The investors wanted to mix this black money with white money. Moreover, a major section of builders and developers have accepted the payment of black money, thereby benefiting from the reduced payment of stamp duties from taxes and property taxes to the central government.

The demonization drive which caused a ban of all old 100 and 500 notes has had a major on not just real estate developers, but also home buyers and other parties. The unexpected ban of 500 and 1000 rupee notes has translated into a major lack of cash in market for all companies which are into real estate development.

More scrutiny financial transactions

Financial transactions, which are usually done in cash have been severely impacted which has caused in cash liquidity issues for companies which are involved in real estate. Share prices of all the major estate developers such as DLF, Lodha Developers, and India Bulls have taken significant measures to come up with the demonetization drive. Additionally, the fall in housing demand has been due to limited flow of cash, which has caused to a limitation in cash flow. This has caused a significant fall in sale prices of residential and commercial properties, which led to higher unsold inventory and reduced profit for real estate developers.

Real estate developers who to a great extent were dependent on cash had been dependent on cash to purchase property have been negatively affected because of the limited flow of high-value currency bills. Home buyers who come from middle-class and have invested in projects which are under-construction properties might face a delay in their project completion because of financial troubles which are faced by their property developers. On the brighter side, potential home buyers are to acquire homes at affordable prices, along with a likely drop in home loan interest rates from financial institutions and banks.

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