Cash crunch slowed down real estate sector

The impact of demonetisation was felt by the real estate sector for nearly six months after its announcement on November 8, 2016. While property transactions and construction activity experienced a lull, there was no slump in the prices of land or houses in the state capital region. For the first few months after demonetisation, people were wary of making on long-term investments due to the lack of availability of liquid cash. They postponed their plans because of which sales took a hit for at least three months. The construction indu-stry also suffered a blow as a result of builders, material suppliers, skilled and unskilled workers facing hardships. The transactions between builders, material suppliers and construction workers us-ually ta-ke the form of ca-sh payments that are made at regular intervals until completion of the project. However, the inability to withdraw legal tender due to the change in the status of currency notes changed the entire equation.

According to C. Shekar Reddy, a former president of the Confederation of Real Estate Developers Association of India, construction activities came to a standstill for a while because builders ran out of liquid cash.

“Post-demonetisation, the Centre made statements that transparency would be increased in the realty sector and thus revenues would be boosted. Hence we expected some relaxations to encourage the industry,” Mr Shekar Reddy said.