Effect of Demonetization on Real Estate in Pune

Demonetization Effect on Real Estate

On November of 2016, the Government of India announced the demonetization of all ?500 and ?1000 banknotes and the issuance of new ?500 and ?2000 banknotes in exchange for the banknotes. The sudden announcement of demonetization has affected the real estate industry most among the other several affected sectors.

The main rationale behind demonetization was to get rid of black money which exists in a large proportion in the real estate industry. Albeit the demonetization move by the government tried to throw the dark cash out of the Indian economy, it affected the real estate sector which visualizes heavy cash flow during property exchange, greatly.

The sales in the real estate sector crashed down by over a third and new launches of property projects came down by 64% in the three month period from October to December 2016 compared with last year. While real estate prices have not corrected officially, some buyers are getting on-the-spot discounts of 10-15%. In the region controlled by the Pune Metropolitan Regulatory Development Authority, only 6,300 units against 9,748 were sold in the three month period time ending December 2016 against the same period of 2015. This was the lowest sales achieved in market the Property in Pune since 2010.

Although the short term disadvantages might seem a bit devastating for the real estate market, the long term advantages surely make up for them. Here are the quick glimpses what effects demonetization has/will have on the Real Estate Industry in Pune as well as the rest of India.

-Demonetisation has made sure that unscrupulous developers make an exit. The main motive of demonetization was to eliminate black money which exists in a large proportion in the real estate industry. This move made by the government had brought down corruption in the realty sector and also all the unaccounted transactions that were being held earlier will now come under the government’s notice. The introduction of these rigorous policies will help ensure that any transaction made between the seller and buyer is accounted and corruption in any form will remain under control on a long-term basis.

Read this also- Current Scenario of Real Estate Market in India

-Earlier, there was a lack of transparency in the real estate market due to the usage of solid cash for a property transaction between seller and buyer. But with the announcement of demonetization, a major change has been implemented in the whole process of the transaction and money exchange. It develops promotes and cashless economy through digital payments and hence brings transparency in the real estate industry especially while purchasing lands.

-While usage of paper currency decreased, digital methods steered in and thanks to technology, a much more efficient system have caught up with the changing times. As businesses come online, we expect greater transparency in the future. Your money and even business ethics are under inspection with RERA doing its bit. If a broker deviates from what he had promised to the buyer or if the developer does not deliver his word, they are now punishable by law.

-Due to the implication of demonetization, banks will have more liquid assets at their disposal due to higher deposits from people all over the country. Home loan rates have fallen from 9.10% to 8.6% in the State Bank of India which is the lowest level in six years. Other banks are expected to decrease their interests too. This will increase the opportunities for people to invest in real estate sector and buy their dream home!

-The overall improvement of the regulatory framework, credibility, and transparency, foreign investors as well as NRIs find the country’s real estate market more dependable. Investments by global investors have increased recently which is one of the major signs of revival for the Indian property market.

Demonetization has its benefits as well as drawbacks for the real estate industry, whether we talk about Pune or any other city or state of India. The reason is high involvement of cash and back money in buying the property. There are chances of reduced sells to big and corrupt players due to the removal of dark cash and the arrival of a cashless system.