This is the word that has been haunting us for a while since the night of November 8th, 2016 when the Prime minister’s office made a flash announcement to re-legitimize Rs 500 and 1000 notes already in the market. People all over India argued on social platforms and in real life about the peril caused by the action. Most of the hunches regarding this were washed out by facts, while some came out to be true. Many confusions still exists in the mind of people whether the demonetization really affected the real estate market in Kerala.
REAL AFFECT ON REAL ESTATE
The major uncertainty of people regarding the adverse effects of demonetization on real estate is because, most of us believe that real estate is solely dependent on black money. This is a misinterpreted information. A better perception of the ways in which demonetization affects Real Estate business in Kerala will enlighten us and help to get rid of some misconceptions on the matter.
Real Estate can be categorized into residential, commercial, retail, agricultural land and industrial segments. It is true that black money has an influence on real estate but the major influence is on agricultural sector. Real Estate sector can be again classified into organized, less-organized, non-organized. There are few dealers in non-organized sector who undertake transactions in cash, but the percentage of them are quite low now. This small proportion is however found to leave a blemish on the entire business. Generalizing a whole sector is obviously misleading.
Geographical aspects play a prominent role in Real Estate as well. If we consider the northern part of India, a larger number of prospective customers are self-employed where dealings in liquid cash are common. But in southern part people usually come under organized structure, as a result all the real estate dealings in south are more transparent and involves less fraudulence. Thus, it is quite clear that the real estate in north experiences more adversities by demonetization than the south.
The luxury, premium segments and non-bankable segments are more affected by the move as they are characterized by surpluses where possibilities of cash for partial payments is not remote. When coming to affordable house building or buying, most people transact money legally without the involvement of black money popping in. Almost all the procedures associated with the purchase of a property, from land acquisition to construction to sales are effected via banking transactions. The very premise of asking prices at fiercive rates in the affordable housing segment is highly hinged on the degree of transparency that has been so established more so over the recent years. Quite obviously, in this case, the demonetization move will have less to almost nil effect on the business. This suggests that the affordable housing segment will see no price cuts as compared to the most premium segments of the business.
Rounding it off, the impact of demonetization on the Real Estate business especially the affordable housing (Apartments) is bound to take fewer hits than previously expected due to the reasons mentioned above. The impact of black money in the market will be curbed by the demonetization move but dealings in the affordable Real Estate segment will continue unabated.