The Centre’s demonetisation exercise has hit the realty sector with property transactions, particularly in the unorganised sphere of land transactions, getting affected, but builders across the State are confident that the measure would benefit the sector in the long term.
Builders concede that there could be a 15 to 30 per cent fall in land transactions as demonetisation could hurt black money, counterfeit currency and hawala transactions, but the organised sector would stand to benefit both on account of greater transparency in transactions and the possibility of a fall in interest rates. “This will be good for us in the long turn,” says S.N. Raghuchandran Nair, national vice-president, Confederation of Real Estate Developers’ Association of India (CREDAI).
As much as 50-60 per cent of the purchases in the organised sector are made by NRIs, who prefer to send money through legal routes. Of the remaining, roughly 40 per cent are local purchases mostly by the salaried class in whose case a housing loan is built into the process so that they can avail themselves of IT rebate for up two residential units. “Quite contrary to public perception, the black money component is less in the organised construction industry,” he says, but concedes that it could be high in the secondary market because of the capital gain burden on the seller and the high registration fees that the buyers must cough up.
‘Prices will stay’
Reports from Kozhikode also suggest that the realty sector is all set for long-term correction in the wake of the demonetisation drive by the Centre. “The general uncertainty will lead to a dip in sales for at least six months. However, the existing prices are unlikely to come down as most developers had purchased land at high rates. The current prices of apartments and flats are hovering between Rs.4,500 and Rs 5,500 per sq. ft. However, markets also command rates up to Rs.6,500 per sq ft,” says Baiju M. Nair, president, CREDAI Kozhikode chapter.
Talking to The Hindu in Kochi, Sanil Kumar V., a prominent builder, concurs. Demonetisation would clean up the sector by driving out the bad elements, besides setting the stage for a sharp fall in interest rates, perhaps to as much as 7 per cent. It has also resulted in labourers opting to have bank accounts. The sector is already in for reforms with the implementation of the Real Estate Regulatory body. The GST will also help the sector, feel the builders.
But a document writer in Aluva said registration of property had come to a grinding halt. People who had reached agreements on sale of property are finding it difficult to honour their word.
