Demonetisation and RERA: How will it impact property prices?

On November 8, 2016, the Government of India de-notified currency notes of Rs 500 and Rs 1,000 as legal tender. The temporary shortage of cash adversely impacted several sectors that depended on cash, notably wholesale markets, the informal sector and even parts of the real estate industry. The real estate industry involves both, formal as well as informal sector stakeholders.

By some estimates, the real estate sector itself is a significant repository of unaccounted money in India, usually by way of property purchased in ‘benami’ form in cash. By other estimates, about 30% of monies changing hands within the real estate transactions are unaccounted. A key purpose of demonetisation was to eliminate such unaccounted cash in such transactions. Ironically, while the purpose of using of unaccounted cash in a real estate transaction has been to avoid taxes and reduce the effective cost(s) of transaction, they have actually, in effect, been instrumental in driving up pricing within the real estate sector.

Read more: CNBC Moneycontrol