Realtors’ dreams come crashing down

November 10, 2016 12:00 am | Updated December 02, 2016 02:37 pm IST - VIJAYAWADA:

The market will collapse beyond imagination, says CREDAI AP president A . Siva Reddy.— File Photo: V. Raju

The market will collapse beyond imagination, says CREDAI AP president A . Siva Reddy.— File Photo: V. Raju

The demonetisation of Rs. 500 and Rs. 1,000 currency notes is likely to impact the real estate sector in the State.

According to Gadde Rajaling, chairman of the Capital Region Builders Association, the realty sector in the State may have to bear a loss of about Rs. 20,000 crore as most of the transactions are not on paper or accounted for genuinely.

The builder and realtors fear that the sector would collapse beyond recovery in the near future. The builders literally spent a sleepless night on Tuesday following the Central government’s announcement. They are keeping their fingers crossed and are clueless on their investments and business.

The government had been warning and taking steps to curb black money but the the realtors and builders did not take it seriously. Hardly 10 per cent of the builders in the State would be insulated from the impact of demonetisation. The builders and organised players, who used bank channels, are unlikely to be affected and gain from the Centre’s decision, says Mr. Rajling. Most of the transactions, be it sale of an apartment or land, are in 60:40 ratio of legal to black money in the State. Interestingly, unaccounted for money transactions are witnessed in the primary market also in AP. Unlike in other cities elsewhere in the country, a buyer will have to shell out some portion of the cost in cash even if a house is bought directly from a developer. Confederation of Real Estate Developers Associations of India AP president A. Siva Reddy says the demonetisation is a death blow to the real estate sector. The market will collapse beyond imagination. The builders cannot offload the ongoing projects given the market conditions. It is anybody’s’ guess on new projects, he says.

New ventures

This apart, the realtors have come up with new ventures in around 20,000 acres across the State. It is estimated that the builders will have to bear a loss of minimum of 30 per cent, which roughly translates into Rs. 3,700 crore. Not less than Rs. 10,000 crore black money has been invested in ventures. In a nutshell, the industry will have to face a loss of Rs. 15,000 crore to Rs.20,000 crore if loss in both real estate ventures and apartments were taken, industry captains say.

On the other hand, the demonetisation apparently did not make any direct impact on registrations.

The registrations followed the regular trend. As the government takes market value into consideration during registration, the demonetisation is unlikely to impact the registrations, says Vijayawada (East) Sub-Registrar G. Balakrishna.

About Rs. 20,000 crore is stuck in investments in land and apartments

Gadde Rajling, chairman, CRBA

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