Prime Minister Modi’s announcement of the discontinuation of currency notes of 500 & 100 denomination is a landmark policy decision which will have a far-reaching impact on the Indian Real Estate.
Significant reduction in black money and hoarding of cash is expected. The secondary real estate would be severely impacted by this step because of the currency involvement in such transactions. The primary real estate market will be slightly less affected as it is far more structured and less exposed to cash dealings.
A short-term crash in secondary real estate prices can be expected and this could be as much as 20-30% which will be good for the sector as yields will go up and volumes will return to the market. This correction will be more of a short-term thing, as long-term fundamentals of Indian Real Estate still say strong. The rental yields from properties are also expected to rise. The economy is doing better than before and the currency overhaul will only lead to further progress in the economy.
With a more transparent outlook, Indian real estate, will now come at par with global standards and help it achieve a significant status in the global real estate market.
So, should one still consider real estate investment?
Definitely. With black money disappearing from the scene, this would be a major step towards an organized and transparent real estate market. Once the initial knee-jerk reaction settles down, significant volume jump should happen.
It will also change the way how real estate is transacted in India. Online aggregators like Square Yards have been working hard towards creating an ecosystem of transparency and accountability dealings in real estate. This move will aid their efforts. Also, a lot of secondary market brokers will consolidate. We will also see the share of volumes of non-cash primary transactions rise. The demand for online aggregators and organized consultants will go up. As a proxy play to developers and asset plays, aggregators should attract more interest now.
However, the immediate fallout would be on asset prices, which will fall, giving impetus to high volume sales. This is the beginning of organized real estate market in India.
