While demonetisation has had far-reaching effects across the country, the real estate sector will possibly be the most affected. While most analysts feel that the demonetisation drive move will lead to a drop in property prices, some believe that it may cause prices to rise. Here’s why:
- Just like any other asset, the price of real estate is based on demand and supply. With demonetisation, most developers will go slow on new launches. Demand is likely to remain same or increase. Hence, more demand and less supply will lead to a price rise.
- The developers have already purchased lands at higher rates. Moreover, they will find it highly difficult to bring down the prices as their investments + the interest they pay on loans + construction costs leave them with a very less margin to do so.
Now, even though demonetisation may lead to a price hike, it presents a good opportunity for homebuyers and investors to buy a property. Here' why:
- Demonetisation has witnessed huge bank deposits in a short time. With the huge amount of cash available, banks will reduce interest rates in the time to come!
- Due to all transactions being carried out in white, the industry will be regarded as a more transparent and trustworthy industry. In addition, other regulatory acts such as RERA and GST will also help in bringing transparency and investors’ confidence back in the real estate sector.
All said and done, both the sides, suggesting a price reduction and a price hike, have got their own logical arguments. However, only time will tell how the market proceeds and if prices will fall or rise.