Demonetisation Policy: Its impact on the Real Estate Sector

Abstract:- The sudden demonetisation policy, which sucked out over 80 percent of the currency in circulation, has hurt the Indian economy with the RBI itself downgrading the growth forecast for this fiscal to 7.1 percent from 7.6 percent earlier. The abolition of Rs 500 and Rs 1000 notes had come as a shock to several Indian industries, especially the real estate market. The real estate market in India has already been witnessing a slow growth and with this move, this sector has become stagnant and will remain this way till there is clarity over money circulation and transactions. Unaccounted money or black money has been affecting the Indian economy for a while and the real estate sector is believed to be a popular channel for such funds. While many have welcomed this move, some have expressed their concern for the real estate market. This present paper is an attempt to understand the impact of this historical move on the real estate sector which is the second largest employer after agriculture and has been estimated to grow at 30 per cent over the next decade

Key Words: India Brand Equity Foundation (IBEF), Gross Domestic Product (GDP), Compound Annual Growth Rate (CAGR), EV/EBITDA.

I. INTRODUCTION

Real Estate sector has always been one of the most watched and most sensitive sectors of Economy reflecting the changes that have been inscribed by the economic policy changes. Be it the tax reforms or demonetization or interest rate cuts or Shrinking stock markets real estate sector always reflects without a doubt. Indeed it is concerned with both common man of this country or rich upper class who see real estate as a parking centre for excess funds (including Cash). The real estate sector comprises four sub sectors – housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the growth of the corporate environment and the demand for office space as well as urban and semi-urban accommodations. According to India Brand Equity Foundation (IBEF), the Indian real estate market is expected to touch US$ 180 billion by 2020. The housing sector alone contributes 5-6 per cent to the country’s Gross Domestic Product (GDP). In the period FY2008-2020, the market size of this sector is expected to increase at a Compound Annual Growth Rate (CAGR) of 11.2 per cent.
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