Prime Minister Narendra Modi on 8th November announced the demonetization of Rs 500 and Rs 1000 notes. All the sectors were shaken up, but the real estate sector which thrives on cash transaction was the worst hit. This demonetization exercise taken by the Indian authority is the third time demonetization has taken place in India if we consider the one that took place just before independence in 1946. Well, this is too early to accurately gauge the depth of the shakeup this Demonetization has caused, but the impact on the real estate sector are clearly visible. Mumbai’s Real Estate, which is India’s most expensive property market, the real estate transactions have almost come to a halt.
Mumbai’s Real Estate will definitely be affected by demonetization as real estate segment traditionally has seen a very high involvement of black money and cash transaction. However, cash transactions mostly happen in the secondary sales market, so in other words, The secondary or the resale market will take a big hit. The high-end segment and luxury segment of residential real estate will also see a major impact from this demonetization since this is another area where a lot of payment takes place in cash. The banking sectors and financial channels have accounted for only a small part of all transactions in the luxury sector space. Thus, this demonetization move is likely to result in dipping of property prices of the luxury property, as the sellers struggle to offload properties to generate liquidity. Luxury home buyers will now have a wider bandwidth of options to choose from now, after demonetization.
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