Skip to main content

Demonetisation - Get Ready for Property Price Hike

There are lot of whatsapp messages and news paper articles doing the rounds that the demonetisation of old currency will result in a crash in property prices. Such messages and news even though they offer a feel-good factor to common readers are far from truth. 

 FEAR IS NOT NEW
In mid-2015, reports predicted a 50% crash in real estate prices. The logic used, was that the rental yield on real estate is very low as compared to the interest rates on bonds. Nothing akin to the prediction happened. However, the report did create a sensation. 


WHY DID THE FEAR FAIL
When the sentiments were against investment in real estate and hence, prices should have down. But, there were also inertial forces that worked against the reduction. Central government, state government, Banks and municipal corporations had indirectly helped stopping the price fall to avoid their revenue loss.


Latest argument for Price Fall:


  • The Indian real estate market has been thriving on black money and controlling the black money will impact the buyer base, reducing the number of buyers. 
FACT: Only resale market, also called as secondary market uses significant black money. Primary market, generally of low value and mostly driven by bank loans is largely clean.

  • Absence of black money will result in making the approvals more difficult and result in lower real estate prices. 
FACT: Fewer approvals would actually mean reduced supply, thus, inducing a hike in real estate prices, not the fall.


Arguments for No Effect or Price Hike:

Theory 1:  If the developers opt for clean money in absence of black money, they have to pay a higher interest rate to purchase land, as banks do not finance land. Thus, a higher effective land cost, will result in higher final cost of building and hence, houses will be costlier. 

FACT: Theory could be right if the black money transactions are controlled, which seems to be a reality.

Theory 2: With demonetisation, some of the small developers who operate like fly-by-night players, will be affected, and will go slow on new launches. Demand will grow at the same pace for end users, same demand and less supply, will push the prices upwards.

FACT: Theory is right when seen in conjunction with real estate bill, which makes it tougher for small player to deliver of promises. Making the transactions and deal cleaner will help the customer to buy the genuine product and help the builder to price them at premium for additional confidence.

 BOTTOMLINE : A closer analysis suggests that prices may only go up, as the arguments, past changes in real estate bills and stakeholders interest, do not support the apprehensions of a price crash.

 Visit www.cmrsproperties.com for latest projects or call 07676122000 for property investment advice.
Labels:

Comments

Post a Comment

Popular posts from this blog

How Green is your Luxury Home?

Do you know that a Green Home consumes 25% less water and saves upto 40% less electricity? It means that you will save atleast one fourth of water tankers standing in your villas or apartments and face less diesel crisis in case of longer power outages. Obviously, you also save lot of moolah in your maintenance cost. Luxurious Green India's super luxury homes are now defined by a life with no compromises.  Apart from an address that will make others turn green with envy, they also offer a Green lifestyle along with well equipped gymnasiums, swimming pools and gardens, complete home automation, and advanced home security systems.  Today’s Indian luxury home buyers are willing and able to pay extra premium, for a desire to stand out and be ‘a cut above the rest’, for super-luxurious green homes wherein price is not a constraint. How to Buy Green? First and foremost, look for a builder that has a view point on resource management. A builder like CMRS Group, which is...
1 comment
Read more

Build your Dream Home, How to Do-It-Yourself?

Building an independent home that you call your own, is a dream come true for many. Even though you need to do a lot of painstaking work to make this dream a reality, you happily do it for the thrill of owning your own piece of land, building a structure as per your requirements, and helping design the architecture with your architect.  But how do you go about doing this if you are a first timer? Why Should You Do This? Benefits Flexibility - You call the shots while paying attention to Design and Vastu . If you want a theme or a concept (e.g. A house with a mini pool in living room), which nobody offers in the Market then building your own way is the only option. Money Saver - Financial rewards of doing it yourself are huge. Villas from builders will cost 50% to 200% of the total price for building your own house. Private Location - Most homes from builders will be available in location crowded by people, if you want to live your life at a private location, the...
Post a Comment
Read more

Advantages of buying a Home from ISO ceritifed builder - Assured Quality

Today, when customer is the king and property market flooded with real estate options, the customer deserves to buy a property from a builder which has a well defined, robust and results oriented quality management system to deliver high quality homes. Assured. Thus, ISO 9001:2000 certification is the best check available to customers to ensure superior quality for the homes that they purchase.   ISO 9001:2008 certification provides independent, third-party verification that the construction processes meet a globally accepted standard for quality management — the same standard that has been used in the high  manufacturing sector for decades. Entirely voluntary, ISO certification is a clear indicator of the Builder's commitment to consistent quality and continuous improvement. As a builder, CMRS Group has acquired ISO 9001:2008 certificate.  Obtainment of the ISO 9001:2009 Certificate means that the Company implements good quality management practices aimed at ...
Read more