The demonetization decree has affected the lives of everyone in India. Every single area has been considerably affected, starting from the local stores to the large conglomerates. The government has ended transactions using the old currency notes, except in some sites. The queues in the ATM’s have, however, gone down along with the National Sensex.
The country is slowly recovering from the entire strain, but the sectors will need even longer to recover. This is primarily due to the fact that the government hasn’t allowed bulk cash withdrawal, considering the amount of cash required to purchase houses. Of course, cheques are widely accepted in this sector leading to some relief of the consumers and the vendor as well. To add to this, the government hasn’t released the new 500 Rupee denomination yet.
When we look at this sector from the inside, there are tons of problems that this revolution has caused. The buying and selling part is the final product, but what happens during the construction of these buildings? The workers are largely daily wage laborers, who cannot be paid with the old currency notes. They can be paid for a set of days with the new 2000 rupee note, or they can be paid every day with the 100 rupee denominations. The problem is that the 100 rupee notes aren’t as extensively available. These workers do not have bank accounts and the idea of electronic cash transfer is denied before consideration.
The procurement of the necessary tools and materials for the construction is slowed down since they cannot be paid with old currency. Ultimately, this leads to delayed construction, which translated to delay in handing over time. According to RERA (Real Estate Regulation and Development Act 2016), any delay in project completion will require the developer to pay the same interest as the EMI being paid by the consumer to the bank, back to the consumer. Failing to do so will result in a jail time of three years, with a fine being included at the disposal of the tribunal.
The unaccounted money cannot be used to buy any property, thanks to RERA. Essentially, this bill prohibits any black money from getting into the sector. The cashless revolution needs to be given more thought and ground level implementation before it can be applied to the day-to-day life.
The statement given by CREDAI specifies, “There is no further scope for correction in housing prices in the primary market post demonetization as rates are already ruling at the lowest level. Credai, however, said that the real estate industry fully and unequivocally supports the decision of the government to demonetize currency notes of Rs 500 and Rs 1,000 in the national endeavor to eliminate black money, corruption, fake currency and terror financing.”
The real estate sector has been a cat on the wall for the past year and this demonetization announcement is a huge blow. The buyers who are procuring properties with legal cash would not have any problem. The general top realtors who have a reputation with the consumers wouldn’t face much qualms and anything that they face would at most be manageable. The real estate builders and developers who are up and coming would face problems. The people, who live outside the metros, stack their money in their homes. This cash, though accounted and legal, cannot be directly used to purchase any property. However, any legal transaction, the one which have occurred before and still are, isn’t affected by demonetization.
This demonetization has paved the way for people to pay taxes at government centers with their old currency. This translated to more revenue for the government. The additional revenue can pave the way for lower tax rates in the coming years, essentially bringing down the loan rates. The same consumer can now afford bigger homes at the same price, since the interest rates might go down.
Overall, the sector is affected at the ground level. The entire situation should settle in time for New Year’s giving the entire thing a fresh start. The transactions have been made transparent for the consumers as well as the realtors. The boom in the sector is just around the corner.