Published on 1/10/2017 3:37:54 PM
Sector cashing in - Demonetization is positively good!
Demonetization has already kick-started the rate-cut cycle, with banks beginning to cut on their lending rates. This is sure to pull in buyers into the real estate market--sooner than later.
Major real estate players say that demonetization is one of the biggest steps in the history of Indian economy and that it will highly benefit the real estate sector.
Market watchers say that while there is no improper transaction in the primary real estate market, the unaccounted money stashed by irregular players that has been now deposited in banks, would be used by the banks to lend to developers with a good track record.
Realty players who have a track record of delivering on time are least affected by the demonetization drive. These developers use the latest technologies and have experienced labour force, who can double the output once the overall economy improves and still offer timely delivery with quality.
A few misconceptions regarding the market due to demonetization have gained circulation over the last couple of months. For one--“prices will fall, demand will dip, and project delays will become a regular feature“.
The stakeholders in real estate and buyers should understand that in the current scenario, demand for good quality development by reputed developers with a track record of sound finances and delivery is bound to increase. The real estate sector has not been so much affected by lack of cash, as it has been by the perception that prices are going to fall. The simplistic explanation offered is that the sector was propped by 20-30% of the funds in cash component and that removal of that would bring down the artificially held high prices. The sector's index fell by 20% immediately.
But, with the confusion clearing up gradually, the reality that is emerging is that with RERA and GST coming into force by the middle of this year, coupled with the slew of market reforms announced, the real estate sector would benefit immensely from the clean-up and, contrary to the current urban legends doing the rounds, prices would in fact firm up and start rising! One thing, however, appears certain--the secondary market may all but dry up while the primary market would hold its own and become more secure, thus pushing the sector to corporatize and become fully transparent.
It was also expected that the investors' market would come to a halt, which further coloured the general perception and painted the whole market as gloomy. In reality, though, market is performing quite normally, as primary sales are taking place at the usual pace, which in the long run would push property prices up.
S K Sayal, CEO of Bharti Realty, said: "Demonetization is sure to improve the primary real estate market by the next festive season. The rate cut cycle has already started, with banks beginning to cut on their lending rates.This will allow more and more people to invest in the real estate sector, as most of the buyers are end users and they opt for financing options rather than paying through stashed money."
Manoj Choudhary, CMD of Airwil Group, said: "Developers who are unable to pay their labour and are using the demonetization exercise as an excuse; in reality, they have a history of delaying projects. But, the real estate act will not take demonetization into consideration and penalize all those who are unable to deliver on time."
Avneesh Sood, director of Eros Group, said: "Banks can now lower their lending rates, the cycle of which has already started, allowing a cushion to buyers in the primary market. With reduced interest rates, demand for property will multiply and, with it, property prices will begin to appreciate. Thus, better demand, transparency in transactions, price appreciation, and reduction in lending rates, will become the calling card of the sector in the next few months."