Purging of Black Money hits real Estate Hard

The real estate prices are bound to go down if the black money is sucked out of the system which may be good news for all the people looking to buy their dream house. Imagine a situation that people don’t have black money to buy flats after flats and with excess capacity already in the real estate, it may be the best time to get your hands dirty and keep your research going on. There may not be a better time for people wanting to invest their hard earned white money to get their dream home.

The litmus test of demonetization is going to be its affect on real estate prices. There are many in the country today supporting the move and many against the move but something at this scale can be only analysed by its after effects.

It is popular belief that there are two things that have the so called “black money” invested mostly in real estate including land, flats, villas or any office buildings and the aurous metal called “Gold”. In this article I would concentrate on Real Estate.

Demonetization of 500/1000 currency notes is going to affect individuals who have unaccounted money in these denominations stashed somewhere in the homes or safes. Since at the face of it, it looks like there was not a lot of opportunity for such people to take that money and do something about it and hence it cannot be used to buy stuff unless the sellers accept such money. For something like real estate where money involved is much larger than gold so that possibility is there but I believe builders will not be able to do something of that sort.

If all this is true, then in coming times the price of real estate is bound to go down as buyers would not have excess cash lying to be invested. Any home buyers or investor of real estate should wait and watch as to what is going to happen the prices. In the real estate industry price changes take time, so delaying the process of buying the home for about 6 months looks to be a good bet.

The correction in prices of already inflated property prices is going to be the criteria for passing the litmus test.

Hopefully it takes time to generate black money afresh and probably it may have gestation period of 1 to 2 years depending on the efficiency of the system(which I am sure is very efficient). Until the point when the coffers are again filled with loose cash , all buyers with white money can look for better deals and once in a lifetime opportunity.

If  this does not happen then the assumption of black money stashed and its role in real estate may have to be looked upon again. All this pain that the country is going through, all this enthusiasm in the middle class and all the 16.5 billion 500 rupees and 6.5 billion 1000 rupees that are getting culled will go waste 🙂

PS: I don’t like classification of Black and White. It is really racism of sorts where we treat ill gotten money as “black” and hard earned money “white”. We should find better terms for these .. whatsay 🙂

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