Realtors Mixed on Demonetization

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Unperturbed by the 12 percent crash at Dalal Street post announcement of demonetization, realtors are indirectly accepting about the unaccounted cash flow into the sector

By Asit Manohar

Expecting control on unaccounted cash and further transparency into the market leading majority of the Indian realtors have hailed the central government’s decision to demonetize high valued Rs 500 and Rs 1000 currency notes. However, when it comes to impact on profitability and lowering of realty prices on unaccounted cash flow, they were mixed as they were shy of accepting the hard fact about the parallel money flow into the sector.

Anuj Puri, Chairman & Country Head, JLL India said, “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.” He said that 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 Before too long, the caricatured version of black money driving Indian real estate is no longer applicable,” said Puri.

Tasking cue from the immediate crash of 12 percent into the Indian markets after the announcement of the demonetization Anuj Puri of JLL India said, “While bellwethers are hinting at dark days ahead, these fears can at best be called unfounded when it comes to the Indian real estate business within the country.”

Giving an account of the major real estate segment and its future post demonetization Puri said, “The primary sales segment is largely influenced by home finance players, and deals tend to be facilitated in a transparent manner. This segment will, therefore, see at best a limited impact in the larger cities, though some tier 2 and tier 3 cities where cash components have been a factor even in primary sales will see a business crunch. The secondary or resale market will, however, certainly be impacted, given the fact that this segment does see the involvement of cash component.” He went on to add that there will be minimum impact of this move on the commercial and retail realty. 

On real estate investment market Anuj Puri of JLL India said, “Projects could get stretched as informal sources of capital may not be available. This, in fact, spells more opportunities for institutional capital. FDI, private equity and debt players will suddenly find the market even more transparent and attractive. Moreover, banks could start funding land transactions, thereby decelerating land prices.”

Giving an indirect indication about the black money involvement into the real estate sector Manoj Gaur, President CREDAI-NCR & MD, Gaursons India said, “This is one of the biggest steps in the history of Indian economy. Although, there is no improper transaction happening in the primary real estate market but the money which was stacked out of the banks will end up with the banks allowing them a freer hand at lending. This will in turn allow them to drop on their lending rates allowing cushion to the buyers in the primary market.” The Managing Director of the Gaursons India further said, “If not revolutionize, this step of the government will definitely bring a big reform in the economy.”

Standing in sync with Manoj Gaur on black money involvement into the real estate sector Rakesh Yadav, Chairman, Antriksh India Group said, “There are going to be no serious impacts of demonetization on the real estate sector because all the transactions in the market have already moved into the cheque mode which automatically enables to keep track of the transactions.” However, stressing upon the customer sentiment and its importance in driving the residential real estate market Rakesh Yadav added, “The market will face a bit of slowness because the real estate sector performs mostly on customer sentiments and currently the sentiments would be low because of the scenario but things will get back to being better in the near future.”

Commenting upon the effect of demonetization on real estate market Vikas Bhasin, Managing Director, Saya Group said, “There is no debate in the fact that this decision will somewhat affect the overall economy and on similar terms the real estate sector as well.” Commenting upon the demerits of balck money involvement into the sector Bhasin added, “There will be a sudden curb on the parallel economy which was running in the country. There were huge demerits of this and it was making the economy hollow from within but with this step, a lot of stacked up money would start getting back in the main stream and make the market more operational.”

Commenting upon the impact of demonetization both in short-term and long-term perspective Ashok Gupta, CMD, Ajnara India said, “Talking about the short term impacts, you will see both black and white money reaching the banks which will in turn be visible as huge liquidity and this will mean surplus reserves for banks enabling them to lend more at cheaper rates. This will allow more and more people to invest in the real estate sector because most of the buyers are end users and they opt for financing options rather than paying through stacked up money.”

Giving a sum up on the demonetization impact on the developers Anuj Puri of the JLL India said, “There will be minimal impact on large institutionalized players with a solid brand and governance framework. Sales largely driven by the salaried class or investors with limited cash involvement would not suffer. Smaller developers are understandably very concerned right now because many of them have depended on cash transactions. We are very likely to see a clean-up of non-serious players due to this ‘surgical strike’ on the parallel economy. The impact of RERA will further discipline the industry, which will be good for its health in the long term.” He said that hotels and hospitality-related real estate in the organized sector would also see a very negligible impact by the demonetization.