 "Black money and realty: Small developers, secondary home sales will be hit by Modi's move")
Secondary home sales market will be badly hit by the government’s move to demonetise Rs 500 and Rs 1,000 notes and might even wipe out many small developers.
According to developers and investors, about 20 per cent home sales in secondary market happen with cash component. Cities such as Delhi-NCR, Hyderabad, Ahmedabad, Surat and Baroda are said to have more deals with higher cash component.
“I do not think that it would have an impact on the organised sector, but the unorganised and smaller developers would be wiped out,” said Mohit Arora, managing director, Supertech.
Parveen Jain, president, National Real Estate Development Council (NAREDCO), a body of realtors, said “The market of premium homes, where smaller developers deal and cash transactions are prevalent, would be finished,” he said.
It is a major move which will help curb unaccounted-for cash in the real estate sector, said Anuj Puri, chairman and country head, JLL India. “The effects will be far-reaching and immediate, and shake up the sector in no uncertain way said Puri.”
Amar Merani, chief executive of Xander Finance, a non-banking financial company, said the move could bring down prices of units in secondary market. “We could witness a 10-15 per cent reduction in resale prices of apartments but I don’t expect significant impact on prices of stock being sold by developers due to this decision,” he added.
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A PE investor said, “Not everyone can do all-white deals. Those who are desperate to sell can cut prices to sell off their asset… It would weed out component of black money from the system.”
However, a chief executive of a property development firm said he expects the prices to go up because now the seller would make provision for capital gains. “Now they will price it with the capital gains component,” he said. The CEO said he believes gold could replace cash in secondary home sales as gold is equally popular in the country.