Due to currency ban, Housing prices unlikely to come down

Due to currency ban, Housing prices unlikely to come down

There is no correction in housing prices in the primary market, demonetisation as rates are already at the lowest level. The Primary market is supported by banks and financial associations which are all regular entities. Such as cash factor is not a basic element of the essential market. Consequently, Credai denies opposing effect on the primary real estate sector arising out of demonetisation.

Government decided to abolish black money and corruption is in the interest of the common man as well as business and industry.

Home loan rates are coming down from the present interest rate of 9.25 percent to less than 7 percent in less than one year from now. This would bring down the EMI for a ultimate consumer.

In other words, the demonetisation would put more money into the pocket of home buyers through lower taxation rate and incentives for home possession.

November 28, 2016 / by / in , , , , , , ,
Analysis on Impact of demonetization of high denomination value notes on realestate sector

After so many days and review of all things, it is sure that current move of Govt to remove 500/1000 notes from market is going to impact every business and every citizen of India. As initially wrote that this will have immediate negative impact on Real Estate Business in short term but there are few positive impact also and it will not impact each and every market of real estate. Some market will have very bad impact and some areas will have less impact. Few observations:

• Wherever circle rates (rates on which govt does registry of property) are less than market rates, market will see correction in rates. The more difference in circle rates and market rates, more correction in rates will happen. For example, in few areas of Delhi, circle rates are 40% of market rates so correction will be more and it will take years to fill this gap.

• Wherever circle rates are near to market rate or difference is not high, there will be less impact (for example , central Noida circle rates are approx. 70-80% of market rates) so it will have less impact and slowly slowly volume of sales will be equal to past in short to medium term. Infarct with builders making little bit correction of rates in these areas, can push more and more sales and volume can go up.

• Wherever circle rates are almost equal to market rates (like Noida Ext, NH-24 properties, NH-58 etc.) will see no impact and even with home loan rates coming down, can see very good jump in sales and volumes can go up even in short team to medium term.

Impact on rate of Interest(www.findmyproperty.com) : In last 6 days, banks are having 6 Lakh Cr more money in banks. As RBI always controls that how much % of total money any banks should have so they cannot keep whole money with them so eventually this money will come in shape of loans to customers/companies (home loan, car loan, personal loan, business loan etc.).So all interest rates will come down and already indication has started coming as banks are reducing FD rates which is always indication that after this interest rates will start coming down. We should expect that rates will be down approx 1-3% in near future. It will not happen immediately but in short to medium term, it will be.

Now see how much difference it can make in real estate, with every 1% change in interest rates, EMI will approx. 7-8% less. Take this example:
On 20 Lakh loan for 20 years:
• EMI on 9.5% : 18,643/month
• EMI on 8.5%: Rs 17,356 /month
• EMI on 7.5% : Rs 16,112 /month

So approx 2 % down in interest rates will be giving approx 10-12% saving on EMI or in other words increasing loan eligibility of the same so the people who

were having loan eligibility of 20 Lakh , now will have loan eligibility of 22-23 Lakh with same EMI amount. This will increase supply and market will go up

November 18, 2016 / by / in