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

This is a big leap forward for a truly digital and modern economy to emerge, given that housing sector itself contributes 5-6% of India’s GDP. The professional realtors have anyways been selling property in cheque payment only for more than a decade now. If anything, this move will bring in more professionalism and organization in the sector. There are many onetime businessmen becoming part time Developers – using cash to develop/construct a single stand alone buildings since they could deal in cash.

The quality and security of such constructions are questionable. Now that this won’t be possible, we will only see organized and professional developers who are anyways favoring cheque payments growing further. It is encouraging. However in all, the organized Developers affiliated with MCHI-CREDAI will benefit in long run – although there will be a little hurdles in the sentiment of flat buyers in short run – in long term for the Real Estate Industry this is a welcome move.Even The Real Estate valuations will also see a correction now.” Mr. Munish Doshi, MD, Acme Group.

“The broader effects of this move will help the sector grow in the long run. Firstly, it will create a level playing field amongst all stake holders in the sector. Institutional funding to developers which till present day came with a higher risk weightage is bound to see some softening with the increased transparency. Prices coming down to more reasonable levels in the residential property market cannot be ruled out. In the immediate future, the sector will be under serious pressure with volume and number of transactions in residential and land markets seeing a substantial downward trend. While it cannot be denied that the impact of this move will be felt in primary markets, secondary markets along with tier-II and tier-III cities will also take a hit. However, RERA and this recent move will prove to be a game changer for this sector and next year this time the real estate sector will be a totally different industry – a more evolved, transparent and a corporatized one!”. Mr. Shishir Baijal, Chairman & Managing Director, Knight Frank India for your perusal.

The banning of higher currency notes is a major move which will help curb unaccounted-for cash in the real estate sector. We have just witnessed a tremendous step towards increased transparency in the Indian real estate industry. The effects will be far-reaching and immediate, and shake up the sector in no uncertain way. Stricter measures against black money have for long been required to help bring about greater transparency, give the Indian real estate sector more credibility and make it more attractive for foreign investors. Black money deals are more common on the unorganized market, but this practice has, in fact, been on the decrease with greater awareness on the part of buyers. Before too long, the caricatured version of black money driving Indian real estate is no longer applicable. Anuj Puri, Chairman & Country Head, JLL India:

Mr. Dhaval Ajmera – Director Ajmera Realty expresses, “The decision of scrapping Rs 500 and Rs 1000 is a powerful step taken by our PM Mr. Narendra Modi. As far as real estate prices are concerned, all sales transactions are through cheque so it shouldn’t have any major impact in the sector. However, this move will give a sharp boost to all formal channels of payment which will help formal economy to grow. It’s definitely is an indirect advantage to honest tax payers. The deflationary impact in general and more specifically on real estate prices will be a boon for affordable home prices. The announcements will go long way in bringing economic prosperity in the lives of the common man. Additionally, it will also control inflation and black money problem will be resolved. India is now moving towards being a “Digital India”.”

“We don’t see an immediate fall in land prices, but transactions will certainly freeze. The overall decline in land prices will have a cascading effect. I shudder to think of developers who have a huge pile of inventory, they will be in deep trouble. Eventually, they will have to reduce prices. However, This is a fantastic move to bring sanity and transparency in the real estate sector. There will be a lot of inflow of foreign capital, because land prices will come down. But, more importantly, ‘Housing For All’ would finally become a reality, as cheaper land will eventually translate into cheaper homes. While there will be short-term pain, but in the long-run, the real estate sector will benefit fundamentally.” Dhruv Agarwala, Chief Executive Officer, PropTiger.com

Mr. Ashwin Sheth, CMD, Sheth Corp Ltd “The real estate sector is in a revival mode and already the implementation of RERA has brought a lot of confidence amongst the buyers. Investments made with unaccounted wealth will be eradicated bringing transparency in the sector.” Further, this move by the Government will now help to curb many inconsistencies and unfair trade practices bringing professionalism in the sector. Reputed builders would not feel the pinch as they have been making use of bank channels for transactions. With the RERA Act and the demonetization of the 500 and 1000 currency notes we can expect to witness positive reforms and sales growth in the affordable housing sector. This is a win-win situation for developers and home buyers”, added Mr. Sheth.

Mr. Dharmesh Jain, President, MCHI-CREDAI “The dream to create a transparent economy will now be attainable. This move will help control corruption and will be great for long term growth prospects in the country. This is a good move to move towards being a digital economy from a cash economy.”

“Great Sixer by PM, fantastic step in the interest of nation.” Vijay Wadhwa, The Wadhwa Group.

Ms. Manju Yagnik Vice Chairperson – Nahar Group, This is a bold and positive step taken by the government which will have a major impact on the real estate sector. This is in pursuant to the policies initiated by the government in bringing more transparency in property dealings, confidence building measures for home buyers and creating a positive environment for the industry at large. Home buyers will now be able to evaluate more realistic pricing of property. It will separate wheat from the chaff; clear off any uncertainty and increase buyer confidence. It will provide well renowned realty brands a level playing field to operate in. Though this may cause inconvenience to people in the short term it will immensely benefit home buyers and the real estate sector in the long term.

Jason Kothari, CEO, Housing.com, “Housing.com has always batted for increased transparency in the real estate sector and therefore, we welcome prime minister Narendra Modi’s decision to ban Rs 500 and Rs 1000 notes. Cash transactions or black money deals have plagued the sector for a long time, sometimes even accounting for up to 50% of transactions. This move, combined with the Benami Property Act which became effective on November 1, will help weed out corruption and black money to a large extent, from the sector. The organised segment of the market shouldn’t be majorly impacted since most homes are now bought by end-users who avail home loans. The unorganised segment which relies mostly on cash transactions, will be impacted significantly however. While this will slow down the market in the short-term, it will make India’s real estate sector more transparent and organised in the long-term, which in turn, will attract more funds, both, domestically and internationally. This is a bold and exciting development for Indian real estate.”

Neha Hiranandani, Director, House of Hiranandani: “This is a bold and progressive move by the government and in our view will be far more effective than RERA and other statutory impositions placed on the sector in weeding out corruption. Layers upon layers of statute breed inefficiency and give way to corrupt practices. This is the move we have been waiting for. There will be a lot of short term pain and confusion, but we feel confident that these kind of policy directives will move India into a new era.”

Mr. Navin Makhija, MD, The Wadhwa Group, The recent announcement by PM Modi is a welcome step towards cleansing the Indian real estate industry. The demonetization of Rs 500 and Rs 1000 currency notes will lead to transparency and systematize the sector. This move will make the industry more reliable and engaging for foreign investors. The unorganized and secondary market will be the most impacted by this decision. With this banks will be flushed with fund and this will reduce interest rate and improve the GDP as well, given this sale will pick up we as developers just need to ensure that continue to provide quality homes to the buyers in time.


This Govt has undertaken several measures to reduce black money circulation and to increase its revenues and this is another step in the right direction. This will further increase transparency in real estate and benefit the affordable housing sector in particular, says Mr. Rohit Poddar, Managing Director, Poddar Housing & Development Ltd.

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