Demonetisation: Short-term and long-term impact on the property market

Bricksnwall Trusted Experts

A persistent problem in the Indian economy has been black money. Some currencies were demonetised by the Indian government on November 8, 2016. The goal was to reduce the use of illicit funds. Following demonetisation, the 500 and 1000 rupee notes were no longer accepted as legal money. Early effects of demonetisation led to financial hardship. Banks were lined up for hours, and many individuals were nervous. Prior to demonetisation, a lot of Indians turned illicit money into white through the real estate sector. Demonetisation therefore had a big effect on the Indian real estate market. People consequently got more economical when buying homes.

To learn more about how the real estate sector was affected by demonetisation, keep reading.

Indian Real Estate's Impact of Demonetisation

In the Indian real estate market, demonetisation has had the most effect

Demand for real estate declined, which was one of the many negative effects of demonetisation on Indian real estate. A 40% decrease in property registrations occurred during the typical home-selling period. This scared the nation's real estate developers. A lot of developers pause their projects to lower risk and protect themselves from losses.

In the secondary sales market, cash was used for the majority of real estate purchases. One important factor was black money. As a result, the resale real estate market saw a decline.

The degree of demonetisation has an effect on the luxury real estate market. This group used cash to make large purchases. The price of luxury real estate fell by roughly 20% to 30%. However, the market's decline also presented opportunities for potential real estate purchasers.

In the real estate sector, the effects of demonetisation affected investors. For many investors, black money, or unexplained money, was an issue. They invested in real estate. Removing illegal funds from the Indian economy was the aim of demonetisation. As a result, these investors were taken off the market.

However, the effects of demonetisation on real estate varied by Indian region.

This measure has no effect on the majority of real estate segments in Tier 1 cities in India. This is because the development in these locations is being supervised by reputable and trustworthy builders. They finance their projects using lawful means. Home loans are one of the additional financial options accessible to buyers of these residences.

Initially, it was assumed that the demand for short-term lodging would decrease in Tier 2 and Tier 3 cities. Their hefty running costs were the cause of this.

Demonetisation was intended to increase the transparency of the country's real estate market. To further organise the industry, cut down on cash transactions.

In conclusion, demonetisation had a detrimental effect on average home sales and had a substantial influence on the real estate industry. The decline in sales was substantial.

The goal of demonetisation was to decrease cash transactions and stop black money. As a result, Indian citizens had access to a wide range of digital payment options.

However, a lot of firms still use cash for their last transactions.