The real estate sector took a beating with the decision to curb black money through demonetisation of Rs. 500 and Rs.1000 denomination currency.
Real estate prices usually drop as inventory cost decreases and demand decreases, However this time Real estate prices have rapidly come down due to demonetisation of Rs. 500 and Rs.1000 denomination currency.
It is the industry where transtations takes place in white and Black, the real dealers insists to take 70% in Black (or unaccounted ) and only 30% is taken in white for which the buyers pay the registration fees to the government.
But now This scenario has changed, Everything has to be in an accounted form. For instance, A normal middle class person migrated from village to city, sells his one acre of land and use his saving to buy a small plot in the city. The money from sale of one acre is unaccountable money as he gives it in cash form to the builder. But now he has to show everything in white.
On the other side, Builder or real estate businessman cannot sell the property at astonishing market prices as the buyers will not be able to poll such huge amounts in white.
In Telugu states, The real estate deals in Amaravathi and in some two-tier and three-tier cities face a bleak future. The prices of land might come down. The govt price of one acre is 9 lakhs whereas the market price used to be 2.5 crores. This difference cannot be filled through white deals, says market expects. Either the govt value has to be increased or the market value has to come down . With Modi announcement, the land values have come down to more than 40 %.
In Vizag, the govt value of Square Feet of build- in area is around 2k to 3k but the builders used to sell at 5k-6k, showing luxury features. After Modi’s announcement the buyers are asking a 40 Lakhs Apartment for 22 lakhs, says a builder from Vizag.
Th Hyderabad, the situation is some what better, as most the potential buyers come from North India , who feels Hyderabad is cheaper compared to Delhi and Mumbai cities. Here buyers are taking a backstep to pay the extra amount as taxes to the government. But for a comman man who already purchased a land or flat for investment purpose, Modi’s announcement is a big jolt.
Deputy Inspector General- Registrations in AP, Vemula Srinivas while talking to media said that almost half of the registrations have been stopped .
Before Modi’s announcement
In Hyderabad, the government value of land in Jubilee Hills Banjara Hills is 42k -45k per square Yard. The Market Value is 1.25 Lakhs per square Yard.
In Hyderabad outskirts, the government value of land is 1.5k -2.2 k per square Yard. The Market Value is 3k-6k per square Yard.
In Amravathi, the government value of land is 9 Lakhs per acre. The Market Value is 2.5 crore in Tullure.
In Amravathi, the government value of land is 6 Lakhs per acre. The Market Value is 1.5 crore in Mangalagiri.
Some realtors refuse to understand the realities of a slow market and will not accept any offers less than what they feel they should get. If a buyer feels that he is not getting the best possible deal, he should be confident enough to walk away and look at the next option on the list.