The Government’s latest move for discontinuing high currency notes has been much debated over in the last few days. Experts from all industries are trying to weigh the consequences of the sudden decision on their respective markets. However, prima facia, the situation overall has been one of panic and has led to a major dip in all markets. Real Estate Stocks fell by a minimum of 12% across NIFTY and BSE. FourrWalls.com brings you the break-up of how it will affect Home Buyers and Investors.
Impact on Residential Real Estate Market:
All News Channels and News Flashes have been forecasting a huge dip in prices in the residential real estate segment. This, however, is a blanket statement being issued considering the market models of cities where Illegal Cash Transactions make up most of the business in the industry.
Explaining with an example:
If XYZ builder has sold an apartment for a value of 1 crore rupees, and has accepted 50 lacs in cash out of this, he has made an agreement of only 50 lacs with the buyer to save tax.
After the ban on high value currency, said builder can’t make an agreement of full value as it will raise a red flag in all Taxation Departments related to the Real Estate Market viz. the State Registry Office, Service Tax Department, and Income Tax Department as well.
These builders now have no choices to slash prices so that they are not left with dead stock.
Such deals are rampant in Delhi – NCR, Gurgaon, Noida, Mumbai and a few other states where a cash component is involved in almost every deal.
However, in cities where such deals are non-existent, home buyers and investors need not worry.
On the contrary, market experts believe that due to high influx of funds into savings accounts, people will be investing more in real estate as it is one of the safest investments which can guarantee monthly returns to home owners in terms of rental income. This renewed demand will definitely lead to a boom in the market in the coming months.
Also, with more money at the bank’s disposal which cannot be left as NPA (Non-Performing Asset) overall interest rates for all sectors should come down in the next quarter which will be a relief for buyers.