Sunday , September 23 2018

Impact of Demonetisation on the Property Market

Impact of Demonetisation on the Property Market

There is no doubt to the fact that the people in India are in panic and are seeking for a lot of answers regarding the India currency and its impact on various sectors of business. A lot of property experts have been receiving queries on how demonetisation will impact the property market and what should the dealers do in such a situation.

Impact of Demonetisation on the Property MarketResults of Demonetisation

The main reason for this panic is the news that has been doing the rounds about the ‘collapse’ or ‘free fall’ of the property market. A lot of people who are in the verge of buying a property are in double minds about whether to buy it or not. A lot of property experts have been receiving mails asking them on if they should cancel the deal and wait until things get back to normal again.

Apart from this a lot of rumors have also been doing the rounds, relating to the property market. Few days back news came that in a particular city the builders have slashed down the property prices by 40% but when approached one of the builders of that city, he said that such a thing never happened. So basically there are a lot of rumors that are being spread currently, relating to the property market.

So it is important that people do not believe such rumors and also do not panic. It is suggested that you do not follow and believe general news reports that talk about the property market. It is true that the change in the Indian currency notes will have an impact but it will not be to an extent that one has to fear. Here are the five points that have to be considered in order to under the impact of the demonetisation on the property market.

Wait for the initial reaction to get over

See whatever is happening now is as a part of the initial reaction to the demonetization. But the situation will not remain like this for ever. Things will change as the initial reaction of the people and the market settles down.

People were made to believe by the media that once Donald Trump comes to power the economy of the world will collapse. As said there was a collapse in the stock market and also the gold prices became higher.  But then just in the course of 4 or 5 days the situation came to normal. So the collapse in the stock, etc. was just the knee-jerk reaction that ultimately fades off.

So in the same way the correction in property prices is the result of the initial knee-jerk reaction of the demonetisation in most cases. But this does not mean that it is good time for the property buyers as one does not know what will happen in the coming days. Depending on the amount of black money present in the market the correction of property prices will change. So the best option available here is to wait until the price of properties stabilizes. It is recommended that do not make any investments now, wait for a few days. Now the number of days that you would have to wait is also not certain, it depends on the amount of black money that is there in the market. If it is more, then the time taken will also be more.

Reputed builders and Small builders

Well if we say that all the bigger and reputed builders deal in white component and the smaller builder involve the black components as well then the correction in the prices will not be a factor if you are dealing with a reputed builder. It is seen in most cases that it is the smaller builders who accept cash payments, and do not provide proper paper work. So with this demonetisation they are most likely to cut down on the prices. So if you are dealing with one of those kinds then there may be a problem.

End users, most likely, will not be to be impacted by the demonetisation

It is being estimated that the property markets of that of Bangalore, Hyderabad, and cities which are end user market would not be affected by this demonetisation. But then cities like Mumbai and Delhi will be affected badly.

Mostly the correction on the property prices will depend on the black component of that area. So what you can do is to check for the black component of the area where you are willing to do the deal.

Lack of NRI investments

With the demonetisation is being estimated that the NRI investments in the property market will go down to a great extent. There are a lot of reasons behind this. One of the main reason being that the NRI’s usually use more black money as there are stricter tax rules for them. But now with demonetisation, use of black component has been made difficult. So it is estimated that they would not invest behind property in India, rather they would go for some other country.

Resale and under construction

Well another common question that is being asked is that demonetisation will impact which of the following more- resale properties or under construction properties. Most of the property experts are of the view that the under-construction property in the low demand areas will be affected to the maximum. This is because the demonetisation has anyways reduced the number of buyers and with the black money becoming difficult to dispose of, people will not be willing to invest in areas which are not good enough.

Apart from this it is also being estimated that the resale properties in the high demand areas will also be affected by the demonetisation. So to conclude this all it is of no doubt that the demonetisation will affect the property market in India but it will not be to an extent where the market will fall completely. Once the initial reactions settles down the market will surely gain stability and people can get back to investing.

It is expected that there will be price appreciation in the areas with white component as these are the areas where the impact of demonetisation will be the minimum.

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