Will HNIs and NRIs quit realty market because of demonetisation?

Their priorities might change, but only for the short term

Post demonetisation, the maximum impact will be felt on the high-end market where majority of investments are by non-resident Indians or high net worth individuals. This market is expected to undergo a slowdown for the next few months.

Demonetisation is likely to adversely impact the high-end market. (Getty Images/iStockphoto)

This segment would typically park cash in either the resale market or the land market and earn huge returns, but with the cash component expected to disappear from the market, there may be very few individuals who would be interested in this asset class going forward.

Experts say that many NRIs/HNIs could change their priorities and look at other options such as gold in the short term or perhaps the commercial leasing market once the confusion over currency disappears.

Those wanting to invest through the all-cheque route in the residential market may invest in Dubai where the rental yield is around 7% to 9% or in London where it is around 3.1%. In India, it is only about 2% to 3%.

For a plot worth Rs10 crore, an HNI in the past would typically offer only about Rs 3 crore in white and the rest in cash. In the event of a sale, cash would be accepted and the unaccounted-for returns would be huge. All this may end at least for the short term, say experts.

Apartments in high-rises available in the resale market will also be badly impacted as there will hardly be any scope for massive appreciation or rental yield, says Amit Jain of FAR Xchange, adding that the government needs to take policy decisions wherein higher loans can be made available for lower rates of interest.