The withdrawal of Rs500 and Rs1,000 notes is all set to impact the realty sector. While the builders who are already hassled by the slowdown rued that it will make the situation worse, there are indications that realty prices may reduce.
Builders who used to take 20-40 % of money in black in many transactions and even the investors who parked their undisclosed amount will now shy away from the market.
According to a leading builder who refused to be quoted, the move will hit them severely. “Many of the homebuyers preferred to pay in cash to save taxes, which ranges up to 15%. In addition, there are many suppliers for whom we need to make payments in cash only. Their payment will be a headache now,” said the builder.
The ready reckoner (RR) are the assessment values of the property, which play an important role in determining the stamp Duty and registration fees. In most places, the gap between the RR and the market value is in the range of 10 to 40 %. Builders used to take cheque of the amount calculated in RR and the remaining gap amount in cash.
Gera Developments, a leading builder said it will hit the cash market severely. “The impact of this will be huge in many markets where payment of cash is mandatory and the major form of profit taking. These markets will see a major crash making an already difficult situation even more challenging. Rohit Gera, Managing Director, Gera Developments
For years, real estate was infamous for parking unaccounted money and builders also preferred to take money in cash.
Many experts have called this a welcome step which will bring about transparency in the realty sector. According to Anuj Puri, Chairman & Country Head, JLL India, a leading real estate consultancy firm, banning of higher currency notes is a major move which will help curb unaccounted-for cash in the real estate sector. “The effects will be far-reaching and immediate, and shake up the sector in no uncertain way. Stricter measures against black money have for long been required to help bring about greater transparency, give the Indian real estate sector more credibility and make it more attractive for foreign investors,” said Puri.