A Glimpse at Demonetization effect

INDORE, India - Nov. 24, 2016 - PRLog -- The Narendra Modi government's brave and unprecedented step to ban old currency notes of high denomination will go a long way in the country's collective fight to cleanse the black money, corruption and hoarding, which is expected yield a good result in the long run.

The biggest benefit of demonetization is that it helps the government to track people who are having large sums of unaccounted money on which no income tax has been paid. However, a part of people are reluctant to accept the fact that this is one of the all time best effort by Indian government to cleanse the system. On the other hand, the other section of people accept the fact that the present difficulties are temporary and there will be a healing and benefits permanently.

The demonetization move comes at a time when the country is moving towards a new tax regime with the implementation of GST. Demonetization would help increase the tax net and along with GST result in reduction of black money generation.

Since black money is used for illegal activities like terrorism funding, gambling, money laundering etc., demonetization will definitely help reduce such activities and also it will take years for people to generate that amount of black money again, in a way it helps in putting an end this circle of people doing illegal activities.

However, the demonetization initiative has a severe impact on Real Estate Sector. The ongoing real estate projects get delayed due to the immense cash crunch. Builders and developers look for alternate funding arrangements while end-users or investors will have to wait for more certainty before making any move.

The unexpected ban high value currency notes has resulted in a situation of no cash in the market to be played in real estate assets, which has subsequently translated into an sudden fall in housing demand across all budget categories in the short term. Also, there would be sporadic delays in the execution of ongoing residential and commercial projects primarily due to the substantial cash crisis and minimal trading in the economy.

Moreover, liquidity has been rigorously impacted which would result in a deflation with limited sales over the coming months. In short, the move has affected the real estate sector as a storm, and it would take time for all shareholders, brokers, buyers, owners and developers in the sector to assess its consequences on their businesses and decisions.

However, through demonetization, although the sectors like real estate, housing etc could witness a major revolution with cash transactions getting rid of, it can further be anticipated that a new era for the real estate industry in India that would be transparent, corruption-free, organized and realistic.

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