The positive and negative effects of demonetization on Bangalore realty

Many Indian cities are not posting the positive real estate numbers which they once were. Gone are the days when the Indian realty market was a thriving and profitable entity. The reality of realty is quite glum. Most of the metros and tier 1 cities have been assailed by the winter winds of the real estate slump. The entire industry is waiting and watching to see what exactly will help it overcome this bad patch and move on towards sustainable growth.

Bangalore is one of the cities which has been affected by this slowdown. This city which is the capital of the southern state of Karnataka, is also the undisputed Information Technology capital of the country. Many home grown companies from this sector and many giants from the world over have a presence in the city. The city’s economy ticks and ticks vigorously because of the IT sector.

Besides the general slump that has affected the country, another factor has also made a muck out of things for the real estate sector in all the cities including Bangalore. The demonetization process which the country has been under since November 2016 has sent shock waves across the Indian economy and the real estate sector as well. Though in the fight against corruption and black money the damage done by demonetization is something one might be forced to overlook, it has been a pain that the realty sector has had to bear.

The demonetization drive has not affected all the segments of real estate in Bangalore. It has had an effect on the sale of
sites in Bangalore and resale flats in Bangalore where a large part of the payment comes in through cash. The real estate sector is known to be a hotbed for corruption and black money related activities. There is a large cash component involved in the purchase of sites in Bangalore and resale flats in Bangalore. So these segments would have felt the brunt of demonetization. Luxury homes which are mostly located in the northern parts of the city would also have borne the impact of demonetization. This is another segment which is heavy on cash transactions.

The new apartments segment would have been relatively untouched by demonetization. This is because this segment is mostly paid for through bank transactions. Though most of the effects of demonetization have not been favourable for the real estate sector in Bangalore and other parts of the country, there is something that can be cheered about.

The banks are now flush with funds thanks to demonetization. They have been able to reduce to the interest they charge on home loans. Presently some of the banks are charging about 8.65% as the interest on home loans. There is still scope for this number to come down in the future. So buying homes can get cheaper in the days to come thanks to demonetization. Those who are looking for homes in Bangalore should keep their eyes glued to the interest rates charged by the banks.