Demonetization on Real Estate: No scope for correction As Housing Prices Is Already At Low, says CREDAI

Realtors' body CREDAI said on Saturday there is no further scope for correction in housing prices in the primary market post demonetization as rates are already ruling at the lowest level. Credai, however, said that the real estate industry fully and unequivocally supports the decision of the government to demonetise currency notes of Rs 500 and Rs 1,000 in the national endeavour to eliminate black money, corruption, fake currency and terror financing.

The association in a statement said that the primary market is funded by banks and financial institutions which are all regulated entities. As such, cash component is not an integral element of the primary market. Therefore, Credai denies adverse impact on the primary real estate market arising out of demonetization. In fact, the primary segment is expected to gain at a rate of 15% YoY, the statement said.

The government's resolve to eliminate black money and corruption is in the interest of the common man as well as business and industry, it said. Real estate industry contributes 7% of country's GDP and is the second biggest employer after agriculture. Given the scale and size of the industry, it is imperative that Credai articulates the impact of demonetization on the industry and brings it to the knowledge of the general public, it said.

In the aftermath of demonetization move, banks are going to have additional funds upward of Rs 10 trillion. Hence, a fall in interest rates up to 200 basis points is expected. An early sign is seen with country's largest lender State Bank of India cutting its deposit rates by 1.75%.

According to Credai, we see home loan rates coming down from the present level of 9.25% to less than 7% in less than one year from now. This would bring down the EMI for the ultimate consumers. Credai expects the mop up of black money to also lead to higher tax collection and a lower rate of personal and corporate income tax from the next financial year onwards. In other words, the demonetization would put more money into the pocket of home purchasers through lower tax burden and incentives for home ownership.

The tendency towards lower rate of interest is also going to be strengthened by a low rate of inflation. Credai, comprising 11,500 real estate developers spread over 166 cities in 23 states in the country, is the apex body for private real estate developers in the country.