There is currently a lot of debate happening on how the government’s demonetization move will impact the real estate sector.
Let’s look at some of the impacts of demonetization on real estate
After scrapping of 500 and 1,000 rupee notes, citizens are depositing money with banks. Most of these deposits are in savings bank accounts. Now banks have a lot of money to lend to citizens thus reducing the home loan rates.
Home loan rates have fallen to their lowest level in six years with the State Bank of India, the country's largest lender, cutting the effective rate to 8.6% from 9.10% and other banks are also expected to follow suit.
The scrapping of higher currency notes is most going to result in lowering the interest rates and will attract more loan borrowers. The loan affordability will rise as the repayment will become smoother.
Increased Return on Investments
Investors find investing in property more attractive than earning interest on bank FD’s as simply buying and renting out gives them more return. Plus they create an asset and earn good appreciations over the years.
Demonetization will see the most money flowing in banking system from people in the unorganized /small scale sector. Crores of new people entering banking system means that they will also be eligible to get bank loans and thus increasing the number of buyers searching for home.
Government will have crores to fund its infrastructure projects such as Swachh Bharat Mission, Smart City Mission, Housing for All and other projects like National/State Highways, Airports, better transport, resulting in more demand for properties in cities.This will certainly boost the overall real estate sector a lot.
Overall we have listed all the impacts on real estate.