News: Demonetisation: It’s cash and no carry for realty as sellers, buyers prefer wait and Âwatch-08.01.2017
Date created 08.01.2017 18:29:53
Demonetisation: It’s cash and no carry for realty as sellers, buyers prefer wait and watch
BENGALURU/MUMBAI: With the government’s clampdown on black money, property brokers have started getting calls from their clients to keep their deals on hold, at least for now. Investors, who meant to close their deals with the cash component, would much rather wait now, given the uncertainty. “It’s obvious that the deals structured earlier with the cash component will not go through now. Some buyers are asking sellers to accept old notes, but sellers aren’t ready for this and are now asking the entire payment to be made in cheques. A lot of deals have been put on hold and many may also get cancelled,” said Yashwant Dalal, president, Estate Agents Association of India. Enquiries from brokerage firms across the country too have dropped by at least 20% in the past week alone, as brokers fear that sales of residential flats may fall by around 40% due to the demonetisation drive. Also Read: All interest rates will fall very soon: Arundhati Bhattacharya, SBI “These are tough times,” said BM Pounacha, a Bengalurubased independent property broker. “I have not lost any deals yet, but investors are adopting a waitandwatch policy, anticipating prices to fall,” he said. Real estate, once a booming business for brokers, had been reeling under the impact of slowdown for over a year now. Project delays and a severe liquidity crunch in the market seem to have hit the commissions of brokers across the country with many small players shutting shops. “The real estate sector is headed for tough times with transactions drying up. Over the next six to nine months, we will see a significant impact on the sector as people recalculate their savings,” said Nishant Singhal, directorstrategy, Investors Clinic. Also Read: Unsung heroes Custodians of ATMs and truck drivers What’s worse, any hope of a demand resurgence has been dampened now with the currency ban. While primary residential markets that depend on end users may not take a big knock, secondary residential sales that rely heavily on black money is likely to be severely affected. “There will be a price correction in the secondary market in the coming quarters due to the liquidity crunch, leading to price correction in the primary market,” said Singhal. On the other hand, investors who had bought property earlier to convert black money are looking to exit with a 1020% discount, fearing action under the amended Prohibition of Benami Property Transactions Act. While big developers are sticking to their earlier incentives such as payment schemes, small developers are offering discounts between 8 and 10%.
ET View: Shore Up Transparency Demonetisation should bring down real estate prices, at least in the shortto medium term. But in parallel, we need to shore up transparency in real estate, including licensing requirements. In tandem, there’s the need to have sound regulation and oversight in the housing and real estate sector, as per the Real Estate Development Act, 2016. It would pay rich policy dividends nationally in the foreseeable future and well beyond.
