Re­tail and de­mon­eti­sa­tion

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - HT Es­tates Cor­re­spon­dent ht­es­tates@hin­dus­tan­ ■

The con­struc­tion sec­tor is likely to be hit by de­mon­eti­sa­tion in the short run be­cause a ma­jor­ity of labour­ers do not have ad­e­quate ac­cess to the bank­ing sys­tem in the form of ac­counts, cou­pled with the fact that de­mon­eti­sa­tion has re­stricted the amount of cash that con­trac­tors can dis­pense to labour­ers, says a Ernst and Young note en­cap­su­lat­ing the im­pact of de­mon­eti­sa­tion on the real es­tate and con­struc- tion sec­tor.

This could lead to de­lay in com­ple­tion of projects, thereby putting pres­sure on the sup­ply side.

As far as the com­mer­cial real es­tate sec­tor is con­cerned, the cash com­po­nent in the com­mer­cial real es­tate seg­ment is min­i­mal, as leases are well doc­u­mented and in­sti­tu­tion­alised; there­fore, the im­pact of de­mon­eti­sa­tion per se should be min­i­mal on this seg­ment. How­ever, it could be im­pacted by other fac­tors such as US elec­tion re­sults and the re­sult­ing im­pact on out­sourc­ing, as well as the re­duc­tion in sup­ply due to con­struc­tion-re­lated de­lays.

Leases in the re­tail seg­ment are typ­i­cally a mix of minimum guar­an­tee and rev­enue shar­ing. The re­tail real es­tate mar­ket can be bi­fur­cated into lux­ury malls and mass re­tail malls. The lux­ury seg­ment is likely to be af­fected neg­a­tively be­cause of the high use of cash in the seg­ment and hence there could be down­ward pres­sure on rentals in lux­ury seg­ment malls, says the note.

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