Impact of Demonetisation on Pune Real Estate Market

On 8th November 2016, the Indian Government declared that the five hundred and one thousand rupee notes will no longer be legal tender. The RBI has since issued Rs.2000 notes and new ones of Rs.500, which have been placed in circulation from 10th November 2016.

The government’s recent move has been taken in an attempt to address the issues of corruption, black money, money laundering, terrorism as well as counterfeit notes in the country. While the sudden move will definitely affect every sector, the real estate industry is a prime sector that’s will be impacted. Let’s have a look:

1. Revival of Economy

The greatest advantage of demonetisation is that black money will be discarded to a large extent from the economy. Also, it will help in tackling the menace of fake currency that has hit the market.

2. Greater Transparency and Trust

As all the transactions now will only be in white, the real estate industry will be regarded as a more transparent and trustworthy industry. Improved market transparency and a positive Government attitude will play a major role in attracting foreign investment.

3. Benefit to Organized Builders and Loss for Unorganized Builders

Organized developers who do not get involved in cash transactions will benefit greatly. People will prefer buying their properties as they would have to pay in white only. Unorganised players who have been dealing with black money will be impacted adversely.

4. Fall in Prices

The realty market in the city might see a price correction. This is good news for home buyers as they can buy their dream home. Moreover, luxury home buyers will have a much wider bandwidth of options to choose from.

5. No Impact on Affordable Housing

In the midst of all this, affordable housing will remain unaffected because of their independence on the cash component. In fact, this housing category might witness more demand due to improved purchasing power.

6. Coupled With Other Measures

Along with other regulatory changes such as the amendment of Benami Transactions Act, Goods and Services Act (GST) and Real Estate (Regulation & Development) Act (RERA), this move will bring transparency to real estate transactions.

While the demonetisation initiative will lead to delays in ongoing real estate projects because of the massive cash crunch, it will pave the way for a more transparent real estate industry in the near future. Also, the Pune market will face minimal impact of demonetisation, as it is primarily end-user driven and rely on bank funding.