Demonetization Can Lead to Price Dip in India’s Realty Sector

Prime Minister Narendra Modi announced a surprising decision on Tuesday. Banknotes of denominations Rs 500 and Rs 1,000 were stripped of their status as legal tenders. PM Modi cited the war against black money as the primary reason behind this resolution. 

Moreover, it will be beneficial to the Indian economy in the long run, he added. This historical step of demonetization will hit tax evaders hard. The transition, however, might also give headaches to the common man.

As a result of this move, around Rs 5 lakh crore of illegal cash will be scooped out of the Indian economy. Various business sectors will be significantly affected, mainly real estate and jewelry. 

The demand for gold is predicted to increase as people are relying less on bills. The chairman of All India Gems and Jewelry Trade Federation, Sreedhar G V, further indicated an increase in uniformity for small jewelry companies. The effects can be seen in Gujarat, where people are waiting in long queues to buy jewelry and gold bars. 

India real estate

Real estate has its massive share of illegitimate capital. The sale-purchase of plots, flats, and commercial property involves a mixture of cash and cheques. 

The cash portion is often the black money, paid as the balance amount of the actual value. Such deals are 20-30 percent more than the market rates in the real estate circle. 

With the ban of Rs 1,000 and Rs 500 notes, realty prices will be corrected and will lead to the complete removal of black money. India’s tier-II and tier-III towns’ properties will have reduced costs, which in turn, will boost the demand. Real estate as a whole will be institutionalized because of this measure.

The banking sector has welcomed this resolve of the government, as it will destroy the coextensive black economy. Experts have marked this deviation from cash-dependence as a sign of a rapidly growing economy. There are 16.5 billion 500-rupee notes and 6.7 billion 1,000-rupee notes in circulation. Demonetization will repeal 80 percent of the total currency.

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About The Author

Jayshree Raja

Jayshree is a professional journalism graduate and has been contributing to various news/media outlet as a regular feature and editorial writer for over five years. Mostly, Jayshree thrives on business conglomeration and development, especially on the realty sector. His strategy includes in-depth research on current trends and provides analytical views on the pros and cons to expand reader's understanding further. In his spare time, Jayshree spends a significant amount of efforts in helping commoners expand their knowledge in business and finance.

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