Has Demonetization Affected the Real Estate Industry?

Since November 6, 2016, demonetization has dominated every conversation with debates flaring up incessantly on its effects on the various sectors. The realty industry hasn’t been left out of the debate either and due to fears of what demonetization could mean to ready-to-move-in homes, many buyers have been holding off from investing. Of course part of the reason is due to paucity of funds with many predicting that this could lead to further reduction in prices.


With the realty sector contributing about 5-6% to the country’s GDP, misinformation on this can lead to potential chaos. Almost a year has passed, but rumours are still flying around about the effect demonetization has had on realty sector. Of course, the naysayers are of the opinion that paucity of black money has lead to lower sales rates, but builders obviously are of the opinion that the expected softening of interest rates, as well as the thin margins in the industry, haven’t resulted in price cuts or any negative impacts on the realty industry. Real estate is divided into luxury, mid- and low-end sectors, with their having been no direct impacts on the mid-market and affordable housing sectors.

After the initial few months when homebuyers went into the ‘wait and watch’ mode (similar to slow-downs witnessed in other sectors too), sales are on an upward swing again on the back of numerous positive factors including a growing economy, low home loan interest rates, and deals and discounts by developers. Also, the primary market for ready-to-move-in homes are funded by banks as home loans, so effectively, this sector has been unaffected by the currency ban; just as precautionary measures, buyers delayed investments due to uncertainties on market trends.

However, buyers should understand that this is the best time to buy homes and negotiate and strike deals as the climate is just right. Developers are also interested in selling volumes, so negotiations aren’t so difficult to swallow.

Location: Thiruvananthapuram, Kerala, India

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