Small-time builders take a big hit

They have no option but to wait for the cash flow to ease

Updated - November 19, 2016 09:58 am IST

Published - November 19, 2016 09:57 am IST - CHENNAI:

While demonetisation does not seem to have affected sales of homes in the organised sector, its impact on the segment that caters to middle and lower income groups has been quite enormous.

Players in the industry say that the bulk of the homes most sought after are in the Rs. 50 lakh – Rs. 75 lakh category and a majority of investors are salaried sections who bear 80 per cent of the project cost through loans. “Investors pay the balance amount in cheque and if there is a cash component that the builder insists on, he has to wait for the crisis to ease,” says an analyst who monitors trends in the industry in the city. “There are thousands of families who are building individual units on tiny plots engaging known civil engineers and workers. They need cash every day – to buy small quantities of river sand, cement and also for the workers’ wages. They are the worst hit,” he says.

According to K.Pandian, a civil engineer in K.K.Nagar, owners of such property have no other option but to postpone the work and wait till supply of cash through banks become normal. Cement distributors are giving away small consignments of cement bags on credit to known customers who are building small projects and individual homes. “Retailers and distributors are willing to wait a bit till the crisis comes to an end. We are managing somehow,” says a distributor requesting not to be named.

Impact on overall sales, if any, will only be temporary and only part of the continuous sluggishness the sector has seen. Land costs too will not come down, he predicts.

Real estate mediators like M.Kaliswaran too are feeling the pinch.

“Whenever there is talk of black money, the realty sector is painted as the offender. Many of us earn so little that we are not even in the tax bracket. Even that has been hit now.”

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