CAPITALISING THE DEMONETISATION
Don’t let the recent demonetization dissuade you from buying your dream home.
Let’s talk about the most talked and tussled topic of our time – demonetisation and its impact on Indian realty. There are many myths that are floating around the market, thanks to the media and other market gossip, which need to be eradicated. Once you understand the pros of the so-called fiasco, you will appreciate the gesture behind demonetisation.
MYTH #1 | PROPERTY PRICES ARE GOING TO FALL
Demonetisation has brought the real-estate market to a verge where developers do not have any room to adjust pricing. Property prices had already touched rock-bottom in the last 18 months. Additionally, a significant rise in construction costs in the past few years has made the idea of reduction highly improbable. Hence, expecting property prices to fall is a misguided train of thought.
MYTH #2 | DECREASE IN PURCHASING POWER OF CONSUMERS
Demonetisation has caused better liquidity in terms of economy thereby causing price stabilisation. As a result, the Reserve Bank of India will have ample leg room to bring down the repo rates in order to create a balance between supply and demand. Also, the repo rates will originate lower borrowings for home loans. In months to come, the consequence of demonetisation will come into its true effect by showing a strengthening of the rupee rate, thus, increasing the purchasing power of the consumers.
MYTH #3 | INDIAN REALTY WILL FALTER AFTER DEMONETISATION
The projects by reputed and credible developers will hardly be affected due to this step. Reason being that buyers of such projects buy homes by applying for home loans and transactions are done through legal channels. Thus, there
will not be any major impact. Small-scale developers banking on unethical practices will suffer the strongest blow. The move of demonetisation will create a more stable and organizational real estate sector. Apart from demonetisation, the Real Estate Regulatory Act (RERA) will make the real estate market more conducive. RERA will make property deals more transparent and fair to buyers, with regards to on-time delivery and the assurance of getting amenities that builders had promised.
- Higher lending capabilities of financial institutions will create a surplus of funds available in the real-estate sector.
- The effect will force reduction of home loan interest rates in the near future thus making funding cheaper. This affordability will mean higher credit eligibility for the same income group.
- Greater ROI on property than a nominal rate of return 6 to 7 per cent on bank deposits, as buying and renting out a home should give them more returns.
- Enhanced tax collections by government will promote fund availability to boost infrastructural development. This in response will support organized real-estate development leading to increase in demand and prices.
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