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BlackMoney Real Estate - End of an Era

Friday, November 18, 2016

We Congratulate the Narendra Modi Government for taking the boldest step to eradicate the nuisance of Real Estate mafia with Corrupt & BlackMoney in the Mainstream Economy of India.

Investments in Real Estate and gold would be the most impacted as these asset classes were the favourites to park unaccounted cash savings. Home improvement stories may also face collateral damage as the real estate sector goes through another leg of downturn.

Demonetisation of higher denomination Indian rupee notes Rs 500 & Rs 1000 mostly held by Corrupt Bureaucrats and Politicians will reduce land transactions and asset values in general, specifically in tier 2/3 towns and cities, where the proportion of unaccounted money in transactions is higher.


Curbs on the use of high denomination notes is likely to hit land transactions hard especially in the NCR region and tier 2/3 towns in India. Investor demand is generally the highest in the NCR region and thus it should be hit the hardest. We think a recovery in the NCR / Mumbia Metro Region property market will be delayed further.

Near-term sales velocity should decline due to uncertainty. Developers with higher reliance on plotted sales could see more slowdown compared to the ones selling flats. The unorganised segment (with lower tax compliance) of Indian real estate will be more hit than the organised one. Similarly, we expect more slowdown in the secondary market, versus primary sales, owing a higher proportion of cash transactions. This could lead to some slowdown in primary sales especially from the buyers that look to upgrade by selling old houses and buying new ones.

We think the discount to NAV in the India real estate sector is likely to increase as sales velocity could come down in the short term.

First Time Home Buyers
Be prepared with 25% Down Payment Cash and rest for Housing Loans. You will get your dream home cheaper, at least 20% discount to prevailing prices before demonetization.

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