Your dream home could be a reality, thanks to demonetisation
If you were planning to invest in your dream home and the recent demonetisation drive derailed your plans, this could be a blessing in disguise.
As the real estate sector grapples with the aftermath of black money being squeezed out of the system, experts believe "achche din" are in store for the aam aadmi.
1) Land price may go down by 30 per cent
Traditionally, real estate has been a dumping ground for large cash transactions, often from tax evasion, for procuring land. Mumbai-based realty firm Liases Foras expects price correction of up to 30 per cent because of demonetisation.
“Land has always been a favourite asset to park black money in; and in its absence hoarders will not find it appealing to buy land and hence demand will be dented. We anticipate land prices to see 25-30 per cent correction,” said Pankaj Kapoor, CEO, Liases Foras.
2) Affordable housing can become reality
As land acquisition prices are set to go down, so will the cost of building houses, especially in Tier 2 and Tier 3 cities. Builders reeling under the dip in housing sales to 22 per cent in the last quarter, will now shift focus to lure first-time home buyers with "white money" or declared source of income and will be offering huge discounts to sell their inventory.
“If the use of cash comes down in property transactions, then one would expect property prices to go down,” said Rakesh Mohan, former deputy governor, RBI.
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| Black money is often parked in land. (Photo: Reuters) |
3) Luxury housing shake-up
Most of the investor class which parked money in luxury housing will take a hit, as most transactions were happening in black. Experts believe that at least 40 per cent correction in price is expected in the luxury housing sector.
“Luxury housing is going to a take a big hit as large transactions will come under scrutiny. It (demonetisation) is a good move but will be painful for this segment in the coming days,” said Sushil Raheja, CEO, Raheja Homes, builders and developers.
4) Housing resale revamp
The secondary real estate market segment has seen large value deals in cash with sellers wanting to avoid long-term capital gains tax. Now small unorganisd developers will be forced to clean up their act and cater to demands of genuine buyers with affordable rates.
5) House rental correction
For tenants who were forced to pay rent above the market rate in cash to their land owners, they are better times ahead. With the income tax department scrutinising the rental income market and cracking down with the benami property Act, there will be greater transparency in this market.
6) Home loans to get cheaper
With over 6 lakh crore already deposited in banks, expectations of reduction in home loan rates are getting stronger. With the banking system flush with liquidity, already the State Bank of India has reduced deposit rates on bulk deposits, indicating that interest rates in home loans could be cut in the next step.