Mix reaction of Real Estate Industry after Currency Withdrawal

rbiBy Accommodation Times News Services

“Demolition of the currency notes of Rs 500 & 1000 is a major decision and will bring about a huge impact on the construction industry as well. The realty prices will witness a significant drop. This initiative by the Modi Government will aid in bringing a transparency in the real estate industry, thus, we will be seeing a more controlled and regulated growth. The consumers will be highly benefitted as there will be an end to corruption within the government departments as well.” says Architect Ricky Doshi, Founder & CEO, ARD Studio.

“Traditionally, the preponderance of ‘black’ or unaccounted for monies in real estate – largely by way of cash transactions is seen in secondary market transactions and supply chains related to primary markets viz. land, material, labour etc. Secondary markets would be affected as unaccounted cash payment would no longer take place leading to some dips in sale process for assets that are sold or purchased in the short term. However, with progress of time, it will not be surprising to see prices go up as sellers come to terms with the fact that capital gains tax has to be paid on monies. Sellers are likely to factor that liability into the sale price. A closer look at the primary market would indicate that there are several components of informality within the production chain – such as purchase of land for onward development of a project. Twenty-four (24) hours earlier, a landowner could enter into an agreement with a developer where part of the consideration paid would be unaccounted. Now, since the landowner can no longer do that – he would either sit out on the land, stalling the entire development project, or charge a higher premium to maintain the same cash margins after tax. The same principle also works between developers, contractors and sub-contractors. All of this included, the input costs of developers will go up, and the only way then can respond will be by raising prices – which will affect a market already strained.” Attributed to Sachin Sandhir, Global Managing Director – Emerging Business, RICS

Commenting on the development, Mr. Ashish Sarin, CEO, Alpha Corp said, “There is a widespread corruption in the system and the government had to take stern measures to weed out corruption from the grassroots level. Hon’ble Prime Minister’s move along with bringing transparency in the sector would also be instrumental in easing up the approval process. Demonetisation of Rs 1,000 and Rs 500 notes would be instrumental in eradicating black money out from the transactions and will strengthen the banking channel as monies will get in to the banking system. The move however would impact the unorganised real estate players and the market will see correction in the short run but in the longer run it will benefit the overall real estate sector.”

“The move by the Prime minister to ban 500 and 1000 rupee notes to eliminate corruption and black money is a fabulous move.
The impact of this will be huge in many markets where payment of cash is mandatory and the major form of profit taking. These markets will see a major crash making an already difficult situation even more challenging.
In addition to eliminating black money this will definitely bring down corruption at least for a while. In the medium to long term the policy that emerges will determine how much corruption will return in due course.” – Mr. Rohit Gera, Managing Director, Gera Developments & VP, CREDAI – Pune Metro

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