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15
November 2016
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Realestate (The Total Investment & Insurance
Solutions)
India woke up to a new beginning that will
soon make the black shadows lurking around its economic well-being a thing of
the past. A landmark decision by the Government of India to demonetise Rs500
and Rs1,000 notes is sure to be emblazoned in the annals of modern India's
history. This bold move is nothing but a sort of capital punishment meted out
to all these malpractices, especially in the real estate segment, says a
research note. The Total Investment
& Insurance Solutions
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| Realestate1(The Total Investment & Insurance Solutions) |
According to the non-brokerage research
centric firm without a large amount of cash at their disposal, builders will be
left with no option but to reduce prices and use sales proceeds for completion
of construction. This, it feels may impact the pace of construction to some
extent, but price points are likely to become more productive over the medium
to long-term. Luxury housing is going to take a big time hit as large
transactions were happening in black. Developers catering to this segment are
sure to face liquidity pressure, it added. The Total Investment & Insurance Solutions
Real estate as a sector has been one of the
major dumping grounds for unaccounted money and counterfeit currency, also
known as black money in common parlance. Whether it is procuring land parcels,
obtaining clearances and approvals from Government authorities or even
purchasing regular construction material, black money and corruption has flown
through the Indian realty seamlessly. As a common practice, even buyers had
been paying a substantial black component while purchasing properties in the
primary as well as secondary markets. Black money led to speculative practices,
which led to artificially inflated prices. An overheated real estate sector
created a vicious cycle and brought inefficiencies in its wake. The Total Investment & Insurance
Solutions
As per Liases Foras estimates, secondary or
resale market is expected to be worst hit because a lot of transactions in that
segment happen in cash with sellers wanting to avoid long-term capital gains
(LTCG) tax. Small and unorganised developers and other fly-by-night builders
may just be reduced to a miniscule percentage as non-compliance has always been
an issue there, it added.
Concisely Liases Foras says, this
(demonetisation) is the quintessential surgical strike - sharp and perfectly
timed. It says, "Not only will it (demonetisation) usher in an era of
efficient pricing in real estate and increase involvement of end-users, it will
also tackle deep-rooted issues of red-tape on the approval front. Developers
will face reduced delays in securing approvals and this will result in faster
completion of construction in the long-term. This is a bold step in eradicating
black money from the financial system and if it achieves the desired outcome,
real estate will be the biggest beneficiary. Ultimately, real estate is one
such sector that truly reflects the face of economy. The more transparent and
strong an economy is, the better it augurs for the health of the real estate
market."
"When the initial jitters and knee-jerk
reactions fade away, a bigger and brighter picture of the Indian economy will
gradually emerge in all its glory. An economy devoid of black money and
corruption has been every Indian's dream, and we hope to experience it for
real," Liases Foras concluded.The
Total Investment & Insurance Solutions
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