RESEARCH REPORT

ON
A CONCEPTUAL STUDY ON THE IMPACT OF
DEMONETIZATION ON THE INDIAN REAL ESTATES

Submitted in partial fulfillment of

MASTERS OF BUSINESS ADMINISTRATION
PROGRAME

Conducted by

ABDUL KALAM TECHNICAL UNIVERSITY,

LUCKNOW
Under the guidance submitted
by

DR. MEENAL YADAV POOJA

MISHRA

HEAD OF DEPARTMENT ROLL NO

1705970045

M.B.A. IV
SEM.

LAL BAHADUR SHASTRI INSTITUTE OF

MANAGEMENT & DEVELOPMENT STUDIES,
LUCKNOW
 DECLARATION

I POOJA MISHRA, Roll No – 1705970045 , student of MBA FOURTH SEMESTER at, Lal
Bahadur Shastri Institute of Management & Development Studies, Lucknow hereby declared
that the Research Report entitled " A CONCEPTUAL STUDY ON THE IMPACT OF
DEMONETIZATION ON THE INDIAN REAL ESTATES ” is an original work and the same
has not been submitted to any other Institute for the award of any other degree.

POOJA MISHRA

M.B.A. IV SEM.

ROLL NO. 1705970045

 ACKNOWLEDGEMENT

The work done under the title " A CONCEPTUAL STUDY ON THE IMPACT OF
DEMONETIZATION ON THE INDIAN REAL ESTATES ” represents not just my efforts to
realize the goal of learning and training in fact it reflects a combination of able guidance,
recommendation and suggestions of a number of peoples.

I am thankful to my mentor DR. MEENAL YADAV for her valuable guidance and
encouragement.

I am grateful to LAL BAHADUR SHASHTRI INSTITUTE OF MANAGEMENT AND

DEVELOPMENT STUDIES for giving me an opportunity to do my research and invaluable
guidance which helped to complete my project with understanding.

A special note of thanks to all the people who have shared their knowledge and cooperation
towards my project.

POOJA MISHRA

M.B.A. IV SEM.

ROLL NO. 1705970045

INDEX
CHAPTER 1
INTRODUCTION
Introduction

Demonetization has vastly impacted the Indian Economy in every possible sphere yet the
economy has proved its stability in such an epic economic event and activity.This research
article solely enunciates the history of demonetization in the Indian Economy and compares
between demonetization measures taken in the past and the current on This paper aims to
honestly analyse impact and probable influence of the demonetization event on the Real Estate as
well as the property sector of the Indian Economy.

Meaning of demonetization

Demonetization is the act of stripping a currency unit of its status as legal tender. It occurs
whenever there is a change of national currency: The current form or forms of money is pulled
from circulation and retired, often to be replaced with new notes or coins. Sometimes, a country
completely replaces the old currency with new currency. Demonetization of currency is a radical
monetary step in which a currency unit’s status as a legal tender is declared invalid. This is
usually done whenever there is a change of national currency, replacing the old unit with a new
one. The present study is an attempt to know about the Demonization in India and its objectives
and effects. The purpose of the present study also elucidates the impact of such a move on black
money.

Reasons of adoption demonetization

Public policies decisions such as this are mostly influenced by factors preceding and
succeeding some events. Demonetization is a move to-

 Counter insurgencies, terrorism and naxalism.

 Control counterfeit currency from terror outfits.
 Counter black money and hawala/ money laundering.
 Formalize economy by encouraging informal economy to use banks and other digital
channels.
 To restrain cash economy which is highly likely get corrupted.
Demonetization in India

The epic event of 8 November 2016 in India not only has shaken the country the markets the
socio- economic and political environment but also has generated a very opinionated debate
among the Indian families regarding pros and cons of the Indian government decision of note
ban. It is a typically tailored historical event in India for the change in political environment and
improvement of the social economic background of the Indian economy and most importantly to
curb the black money. Such historic event is one of its kind yet history reveals occurrence of near
to similar two more events which was a strategic decision by the then governments in order to
structurally change the economy.

In 1946, the currency note of thousand and ten thousand were removed from the dissemination.
The ban genuinely did not par take considerable influence, as the exchange of like superior
coinage was not reachable to the Janta. Nevertheless, both the notes were reestablished in 1954
with a superfluous insertion of rupees five thousand notes.
History repeated itself

It was on 16 January 1978 that the Janata Party coalition told the nation, which had assumed
office a year before in 1978; the Prime Minister Shri Morarji Desai proclaimed the exchange
ban taking rupees thousand , five thousand and ten thousand out of circulation. The exclusive
aspiration of the embargo was to reduce black money production in the country. It was the
Wanchoo committee who made recommendations in 1970’s to withdraw big bank notes ,yet
these recommendations could not be publicized in order to keep up the secrecy of the operation
for honest eradication of black money that prevailed in the then economy atleast partially. The
then Governer of Reserve bank of India IG Patel in his book “Glimpses of Indian Economic
Policy: an Insider view,” wrote that these measures were hardly successful and never gave
remarkable results as such.

They were same in ways:

In 1978 and 2016 both the Prime Ministers wished to drive out the black money from circulation.
Both Shri Morarji Desai and Shri Narendra Modi had announced their decisions on the
broadcast radio and television for the latter. Confidentiality was crucial for both the operations
for both the time periods.

They were different in ways:

In 1978, all Banks were closed the following day but that was not the case for 2016.Nevertheless
the Governor of RBI Dr. Urjit Patel backed out 2016 Prime Minister whereas the same cannot be
concluded in case of our 1978 Prime Minister as Dr.IG Patel was skeptical and critical about the
move. The impact or bearing of 2016 demonetization was larger in terms of volume and was
wholesome in terms of influencing the mass but same cannot be said for 1978 demonetization.
Let come back

Whether the buzz is true or not, time will tell but people have started believing that maybe notes
of smaller denominations like fifty and hundred will be redesigned for future sanctity. That
prompts us of a happening socializing back to early seventies, when there existed tittle-tattles of
retracting rupees hundred notes from circulation, and proximately masses of folks were seen
hastening to depositories for altercation of their rupees ten and twenty notes currencies. Most of
India's commercial atmosphere has been remarkably traumatized by the demonetization and
though it too early to analyse its impacts but still its bearing is evidently visible in all the sectors
of the economy. The spatial differentiated opinion on how demonetization has impacted the
different sectors macro-economic fundamentals etc as a whole is still on and will be. The
Consumers Price Index has reduced upto 3.12% (RBI, March 2017) and moreover the Gross
Domestic Product at 7.1% (UNCTAD, 2017) is still boosting the economy giving us the growth.
Was it worth it?

On its own, possibly not. It created too much economic disruption, particularly for the rural poor
who operate only in the cash economy, and not enough gain. However, demonetization needs to
be seen in the context of a wider program of reforms in India which are significant in terms of
the nation’s economy, society and real estate sector. These include:

The Goods and Services Tax (GST), or the national sales tax: Goods will be able to be
transported throughout India without negotiating state by state sales tax systems. This will
benefit to economic efficiency in general and the logistics sector in particular.

The Real Estate Regulation and Development Act (RERA): Will provide a framework for
comprehensive regulation of all phases of the real estate development process at the national and
state levels to improve market transparency.

Exemption of Dividend Distribution Tax on special-purpose vehicles in 2016: This opens the
way for expansion of the REIT sector in India, bringing more professional real estate
management and a more diversified set of real estate investment opportunities.

Infrastructure status for affordable housing along with other tax reliefs and development
incentives under the Pradhan Mantri Awas Yojana (PMAY) scheme.

In addition, the government is about to announce details of a large fiscal stimulus to boost
growth. At 69%, India has a debt-to-GDP ratio that is about the same as Germany’s, so India has
plenty of ability to spend to support the process of change.

The reform program should be watched carefully as it shows that the real estate sector will be at
the heart of India’s exciting, if bumpy, transformation.
Demonetisation in World

Here are some countries that tried demonetization before India...

1. Nigeria

During the government of Muhammadu Buhari in 1984, Nigeria introduced new currency and
banned the old notes. However, the debt-ridden and inflation hit country did not take the change
well and the economy collapsed.

2. Ghana

In 1982, Ghana ditched their 50 cedis note to tackle tax evasion and empty excess liquidity. This
made the people of the country support the black market and they started investing in physical
assets which obviously made the economy weak.
3. Pakistan

From December 2016, Pakistan will phase out the old notes as it will bring in new designs.
Pakistan legally issued the tender a year and a half back, and therefore, the citizens had time to
exchange the old notes and get newly designed notes.

4. Zimbabwe

The demonetization of the Zimbabwe dollar was pronounced by Finance minister Patrick
Chinamasa in the 2014 National Budget, as well as in the Reserve Bank Governor John
Mangudya’s mid-term Fiscal Policy Review in January 2015.
Demonetisation is the act or process of removing the legal status of a currency unit. It is
necessary whenever there is a change of national currency. The old unit of currency must be
retired or decommissioned.

Zimbabwe adopted the multiple currency system or dollarisation in 2009 and it is therefore
necessary to demonetise the Zimbabwe dollar unit to replace it with the multiple currency system
as was approved in the Finance (No 2) Act of 2009.

Demonetisation is not compensation for the loss of value of the Zimbawe dollar due to
hyperinflation. It is an exchange process. Let’s hope that we have learnt valuable lessons from
the period of hyperinflation.

According to professor Steve Hanke, Zimbabwe’s inflation peaked at over 79 000 000 000%,
that’s 98% a day.

That means that prices doubled every 24 hours! Zimbabwe recorded the second highest rate of
inflation in history. Only Hungary in 1946 recorded a higher rate of inflation where inflation
reached 4,19 x 10¹⁶% or 207% per day. In the case of Hungary prices doubled every 15 hours.

According to the great economist John Maynard Keynes, “There is no subtler, no surer means of
overturning the existing basis of society than to debauch the currency. The process engages all
the hidden forces of economic law on the side of destruction, and does it in a manner which not
one man in a million is able to diagnose.”

By a continuing process of inflation a substantially major part of the wealth of citizens in a

country is systematically and undetected taken away from them. Through this method, not only
is their wealth destroyed but obliterated arbitrarily; and, while the process impoverishes the
majority, it enriches a selected few.

The sight of this arbitrary re-arrangement of riches strikes not only at security but also at
confidence in the equity of the existing distribution of wealth.

Hyperinflation saw the transfer of wealth in Zimbabwe. It did this in a latent way that very few
people realised. Those who were smart enough to invest in properties and shares preserved the
real value of their savings.
For the most part, people kept their money in savings accounts whose value was eventually
destroyed by hyperinflation. Overnight people found themselves with their life savings wiped
out. Let’s hope that history is never repeated not only for Zimbabwe, but for the whole of Africa.

The process reaffirms government’s commitment to the multi-currency regime. In the January
2015 Monetary Policy Statement, Mangudya alluded to the conditions precedent before any
change from the multicurrency system can be entertained.

So Zimbabwe used to have $100,000,000,000,000 note. Yes, a one hundred trillion dollar note!
The Zimbabwean economy went for a toss when President Robert Mugabe issued edicts to ban
inflation through laughable value notes. After demonetisation, the value of trillion dollars
dropped to $0.5 dollar and were also put up on eBay.

5. North Korea

The demonetisation that happened in North Korea in 2010 left people with no food and shelter.
Kim-Jong ll introduced a reform that knocked off two zeros from the face value of the old
currency in order to banish black market.

6. Soviet Union
Mikhail Gorbachev ordered to withdrew large-ruble bills from circulation to take over the black
market. The move didn’t go well with the citizens which resulted into a coup attempt which
brought down his authority and the led to Soviet breakup.

7. Australia

Australia became the first country to release polymer (plastic) notes to stop widespread
counterfeiting. Since the purpose was to replace paper with plastic and only the material
changed, it did not had any side-effects on the economy.

8. Myanmar
In 1987, Myanmar’s military invalidated around 80% value of money to curb black market. The
decision led to economic disruption which in turn led to mass protests that killed many people.
CHAPTER 2
 OBJECTIVE AND SCOPE OF STUDY

Objective of study:

1. To understand the effect of demonetization on the real estate business.

2. To conclude whether there was a negative or positive effect of demonetization on real
estate.
3. To analyze the change in buying behavior customers in real estate after
demonetization.
4. To see the positive and negative impacts of demonetization.
5. To understand how the problem of no cash and black money was tackled.

Scope of study:

The scope of the study is limited to real estate companies. This study only covers the impact of
demonetization and the performance in real estate companies. With the demonetization policy,
the real estate sector faces lot of challenges and opportunities. This study help to analyses the
real impact of demonetization in real estate.
Real estate is the property, land, buildings, air rights above the land and underground rights
below the land. The term real estate means real, or physical, property. “Real” comes from
the Latin root res, or things. Others say it’s from the Latin word rex, meaning “royal,” since
kings used to own all land in their kingdoms. The U.S. Constitution initially restricted voting
rights to only owners of real estate

 Real estate is a term that refers to the physical land, structures, and resources attached
to it.
 Real property includes the physical property of the real estate, but it expands its
definition to include a bundle of ownership and usage rights.
 The distinction is most useful in the real estate world, where different ideas might apply
to owners versus renters or leasers.
 To most of the general public, the idea of real estate encompasses real property, but from
a legal perspective, the distinction is important.
 The real property consists of both physical objects and common law rights; real estate
only consists of physical objects.
Types of Real Estate

There are four types of real estate:

1. RESIDENTIAL REAL ESTATE

Residential real estate includes both new construction and resale homes. The most common
category is single-family homes. There are also condominiums, co-ops, townhouses, duplexes,
triple-deckers, quadplexes, high-value homes, multi-generational and vacation homes.

The advantages of investing in residential real estate

The investment decision depends on the investor’s knowledge of the market; commercial real
estate investments are equally lucrative, but they are little more complicated than the residential
real estate investment.

 The residential real estate market is easy to understand

There are two main modes of earning from residential property… rental income and property
value appreciation. If you have a good command over the rental market, you can spot the ideal
property and location which would give you constant returns. More, you can take the advantage
of the overall increase in the property prices in the long run and monetize it at the appropriat
moment. For commercial real estate, understanding the quantum of appreciation of property over
the time and effect on the future desirability is not easy to grasp.

 Residential real estate market shows better stability

The demand for residential real estate is constant and ever increasing as the population increases.
Even if the real estate market slows down, the demand for purchasing property might decrease,
but the demand for rental property remains consistent. On the other hand, if the market is on a
downward slump, the demand for commercial real estate might become obsolete. Getting loans
to purchase a residential property is easier than getting a loan for commercial property too.

 Residential real estate properties are easier to lease

The demand for commercial property is very tumultuous, compared to the stable demand
for residential properties. Also, the lease tenure and types of payment for residential
properties are different than that of commercial property. And it takes a lesser amount of
time and money to find a tenant for residential property.

 The dangers of leverage. While leverage can help boost your investment returns, it can
also magnify your losses if prices fall significantly. You can also be hit with a margin
call if your property is worth less what you owe the bank and face foreclosure If can’t
service your loan.
 Non-liquidity. Real estate is the least liquid among the various asset classes. It may take
weeks, months, or even years before you find a suitable buyer for your property. If you
need to sell urgently, you might need to considerably lower your prices to attract a buyer
quick.
 Hands-on management. Owning an investment property requires someone to handle the
tenants, repairs, and upkeep & maintenance. Unless you can afford a property manager,
you might need to be the one to do all this.
 High costs involved. Buying and maintaining a property incurs significant costs
including property tax, stamp duties, maintenance fees, and agent commissions. Again,
this inflates the cost of owning real estate.
 2. COMMERCIAL REAL ESTATE

Commercial real estate includes shopping centers and strip malls, medical and educational
buildings, hotels and offices. Apartment buildings are often considered commercial, even though
they are used for residences. That's because they are owned to produce income.

Commercial real estate has a business use and focus. This property type includes office
buildings, malls, restaurants, and other such activities. Commercial real estate may be owner-
occupied or leased. Industrial real estate is a subdivision of commercial real estate and includes
property where manufacturing, warehousing, production, and assembly take place.

The advantages of investing in commercial real estate

Here are some of the pros of buying commercial real estate over residential property.

 Income potential. The best reason to invest in commercial over residential rentals is the
earning potential. Commercial properties generally have an annual return off the purchase
price between 6% and 12%, depending on the area, which is a much higher range than
typically exists for single family home properties (1% to 4% at best).

 Professional relationships. Small business owners generally take pride in their

businesses and want to protect their livelihood. Owners of commercial properties are
usually not individuals, but LLCs, and operate the property as a business. As such, the
 landlord and tenant have more of a business-to-business customer relationship, which
helps keep interactions professional and courteous.

 Public eye. Retail tenants have a vested interest in maintaining their store and storefront,
because if they don’t, it will affect their business. As a result, commercial tenants and
property owner interests are aligned, which helps the owner maintain and improve the
quality of the property, and ultimately, the value of their investment.

 Limited hours of operation. Businesses usually go home at night. In other words, you
work when they work. Barring emergency calls at night for break-ins or fire alarms, you
should be able to rest at night without having to worry about receiving a midnight call
because a tenant wants repairs or has lost a key. For commercial properties it is also more
likely you will have an alarm monitoring service so that if anything does happen at night,
your alarm company will notify the proper authorities.

 More objective price evaluations. It's often easier to evaluate the property prices of
commercial property because you can request the current owner’s income statement and
determine what the price should be based on that. If the seller is using a knowledgeable
broker, the asking price should be set at a price where an investor can earn the area’s
prevailing cap rate for the commercial property type they are looking at (retail, office,
industrial, etc.). Residential properties are often subject to more emotional pricing. See
the Nolo article Is that Residential Real Estate Investment Property Worth It? for more
on the subject, including an explanation of cap rates. Triple net leases. There are
variations to triple net leases, but the general concept is that you as the property owner do
not have to pay any expenses on the property (as would be the case with residential real
estate).

 More flexibility in lease terms. Fewer consumer protection laws govern commercial
leases, unlike the dozens of state laws, such as security deposit limits and termination
rules, that cover residential real estate.
 The disadvantages of investing in residential real estate

While there are many positive reasons to invest in commercial real estate over residential, there
are also negative issues to consider.

 Time commitment. If you own a commercial retail building with five tenants, or even
just a few, you have more to manage than you do with a residential investment. You can’t
be an absentee landlord and maximize the return on your investment. With commercial,
you are likely dealing with multiple leases, annual CAM adjustments (Common Area
Maintenance costs that tenants are responsible for), more maintenance issues, and public
safety concerns. In a nutshell, you have more to manage; and just as your tenants have to
worry about the public eye, you do as well.

 Professional help required. If you are a do-it-yourselfer, you better be licensed if you
are going to handle the maintenance issues at a commercial property. The likelihood is
you will not be prepared to handle maintenance issues yourself and you will need to hire
someone to help with emergencies and repairs. While this added cost isn’t ideal, you’ll
need to add it on to your set of expenses in order to properly care for the property.
Remember to factor in property management expenses when evaluating the price to pay
for a commercial investment property. Property management companies can charge
between 5-10% of rent revenues for their services, which include lease administration.
Evaluate beforehand if you want to manage leasing and the relationships yourself, or if
you want to outsource those responsibilities.

 Bigger initial investment. Acquiring a commercial property typically requires more

capital up front than acquiring a residential rental in the same area, so it’s often more
difficult to get your foot in the door. Once you’ve acquired a commercial property, you
can expect some large capital expenditures to follow. Your property might be humming
along for a few months and wham, here comes a $10,000 bill to address roofing repairs or
a new furnace. With more customers there are more facilities to maintain and therefore
more costs. What you hope is that the gains in revenue outweigh the gains in costs, to
support purchasing a commercial property over a residential one.
 More risks. Properties intended for commercial use have more public visitors and
therefore have more people on the property each day that can get hurt or do something to
damage your property. Cars can hit patrons in parking lots, people can slip on ice during
the winter, and vandals can spray paint the sides of the building. Incidents like these can
occur anywhere, but chances of experiencing something like these events go up when
investing in commercial properties. If you're risk adverse, you may want to look more
closely at putting your money in residential properties.
1. INDUSTRIAL REAL ESTATE

Industrial real estate includes manufacturing buildings and property, as well as

warehouses. The buildings can be used for research, production, storage and distribution
of goods. Some buildings that distribute goods are considered commercial real estate. The
classification is important because the zoning, construction and sales are handled
differently. Industrial property is used for industrial purposes. It sounds simple, but it
comes in all shapes and sizes and covers a huge range of business types. Industrial
properties can generally be broken down into three sizes: small, large and enormous.
Small industrial sites include single or double-storey buildings zoned for industrial use.
These often have flexible interior space, usually a mix of warehouse and office space.
‘Flex’ spaces are used by small businesses such as mechanics, research laboratories and
start-ups.Large industrial properties include medium to large warehouses and factories
that are designed to manufacture or store goods. They include distribution companies
such as third party logistics (3PLs).On the larger end of the scale are the ‘big box’
industrial spaces. These enormous industrial spaces are used as logistics and distribution
centres that hold and then distribute finished goods to stores and/or directly to
customers. If you think of the type of warehouse Amazon would have, you will get the
idea.

The advantages of investing industrial real estate

Investing in industrial real estate can be good business for the savvy investor. Some of the key
benefits include:

 Higher rents = higher yields

One of the attractive aspects of investing in industrial property is the higher rental incomes and
yields (the annual return on investment) they offer. Industrial property is usually valued in
relation to the square metres available and can offer yields of 8%, compared to say just 4%-5%
on a house. Another advantage is that most industrial leases include fixed annual price increases,
which are often linked to CPI.

 Longer Leases

Industrial tenants are usually willing to sign long lease agreements (up to 10 years in some cases)
that provide investors with much greater security than a typical residential lease.

 Net leases mean tenants pay most outgoings

Most industrial leases are net leases. This means the tenant pays for costs that would normally be
paid by the owner. These include insurance, utilities, maintenance and repair costs.

 Low-maintenance buildings

Generally speaking, a good tenant will maintain the building to a high standard, as the
appearance reflects on their business. This means industrial buildings can be relatively low
maintenance as the tenant is likely to attend to any maintenance issues quickly themselves.
The disadvantages of investing industrial real estate

It’s important to understand the risks involved with investing in industrial property. Here are a few of the
key risks you need to consider (and this is by no means an exhaustive list).

 Vacancy risks

Industrial properties are much more vulnerable to market conditions than residential property, so
the risk of vacancy is higher. If a business closes and economic conditions are grim, it can take a
long time to find a new client. Investors should be prepared for long periods of vacancy.

 Expensive to invest

Banks view industrial real estate as a riskier investment than residential, so the cost of borrowing is
higher. Banks usually demand a bigger deposit (around 30%) and interest rates will often be higher than
for a loan for residential property.

 Obsolescence

The industrial sector is constantly evolving and innovating. This means industrial buildings can quickly
become obsolete if the clearance height is too low, access is limited or the floor space unsuitable for
modern machines.

2. LAND
Land includes vacant land, working farms and ranches. The subcategories within vacant land
include undeveloped, early development or reuse, subdivision and site assembly. Here's more
at Land Broker Transactions

The disadvantages of investing industrial real estate

 Opportunity to Create the Highest and Best Use

One of the biggest benefits of buying vacant land is the freedom to create the property you want.
Although it may require foresight, as you would need to determine what the best use of the
property would be in your particular area, it also allows you to get creative. Of course, many
zoning restrictions are already set, so you would have to either adhere to them or go through the
proper channels to have them changed.

 Direct Ownership

Buyers of vacant land typically pay with cash, which would enable them to have full/direct
ownership. Owning the land outright can bring peace of mind, especially since it’s a tangible
asset that doesn’t wear out. Plus, you would avoid things like mortgage interest and loan
origination fees typically charged by the bank.

 Less Maintenance
Vacant land is much easier to manage remotely than rental properties are. Many of the
maintenance concerns of a rental (i.e. plumbing, electrical, common areas, etc.) don’t apply to
vacant land. There’s typically less vandalism as well.

 More Affordable Than Developed Land

It’s usually cheaper to own as a long-term investment, especially since property taxes and fees
are often lower than they are on developed land.

Also, sellers of vacant land are usually more motivated to sell, so you can get a lower price. You
may even get seller financing. The affordability can be a game changer.

For example, when I purchased the vacant land for my vacation home, the land value went up in
time between when I purchased it and when I developed it. I was able to use it as collateral for
the construction loan, which I was eventually able to convert to a conventional mortgage without
refinancing. When the project was completed, my total cost for the land and development was
much lower than the retail value of the property.

The disadvantages of investing land real estate

 More Difficult to Finance

It’s more challenging to get traditional financing to purchase vacant land. So, if you build on it
and then the property doesn’t sell right away, your money is tied up in the deal while you wait.
In that situation, it would be a long-term, illiquid investment.

 Fewer Tax Advantages

Although you can still depreciate certain improvements, such as roads or a new sewer system,
vacant land leaves you without any structures to depreciate. You also wouldn’t have a mortgage
tied to a structure, so you wouldn’t be eligible for a mortgage interest deduction.
  No Cash Flow Right Away

Now, although you wouldn’t have a mortgage to make payments on, you would likely have other
expenses, such as property taxes, the cost of improvements, and sometimes even association
fees. Without rental income coming in, you may need to get creative in order to cover the
expenses.

 Permits and Approvals Required

How the property is zoned locally (i.e. residential, commercial, etc.) can determine what you are
able to do with the property as well. The timeline for getting your project approved by the
township can also vary.

 Physical Issues with the Property Itself

Sometimes the property itself can have issues. For example, I would avoid flat lots due to water
runoff issues. Likewise, with mountain property, steeply graded land is harder to build on. Also,
I would need to be clear on the situation with septic, sewer, water, and road access.

Besides township restrictions and any issues with the property itself, the success of your deal can
also be partially dictated by market conditions.

 Impact of Market Conditions

Let’s say you didn’t build on the land, but you did improve it somehow post-purchase (i.e.
subdividing, roads, sewer, etc.) and/or the area appreciated. You may still have a great deal on
your hands.

How the Real Estate Industry Works

Real estate also refers to producing, buying and selling real estate. Real estate affects the
U.S. economy by being a critical driver of economic growth.

Construction of new buildings is a component of gross domestic product. It includes both

residential, commercial, and industrial buildings. In 2018, real estate construction
contributed $1.15 trillion to the nation's economic output. That's 6.2 percent of U.S. gross
domestic product. It's more than the $1.13 trillion in 2017, but still less than the 2006
peak of $1.19 trillion. At that time, real estate construction was a hefty 8.9
percent component of GDP.

New home building is a critical category. It includes construction of single-family homes,

townhouses and condominiums. The National Association of Home Builders provides
monthly data on home sales and average prices. The data on new home sales is a leading
economic indicator. It signals how the housing market will do in nine months. That’s how
long it takes to construct new homes. The NAHB also reports new home starts, those are
the number of home construction projects on which ground is broken.

Real estate agents assist homeowners, businesses and investors buy and sell all four types
of properties. The industry is typically divided up into specialists that focus on one of the
types.

Sellers' agents help find buyers through either the Multiple Listing Service or their
professional contacts. They price your property, using comparative listings of recently
sold properties known as "comps." The can help you spruce up your property so it will
look its best to customers. They assist in negotiations with the buyer, helping you get the
highest price possible. Here are more sellers' agent services.

Buyers' agents provide similar services for the home purchaser. They know the local
market. That means they can find a property that meets your most important criteria.
They also compare prices, called "doing comps." It allows them to guide you to areas that
are affordable. Buyers' agents negotiate for you, pointing out reasons why the seller
should accept a lower price. They help with the legalities of the process, including title
search, inspection and financing.

Real estate agents who want to increase their professionalism become REALTORS®.
The National Association of REALTORS® publishes provides monthly reports on the
number of homes resold and their average price. It's a better indicator of the health of the
overall housing industry than new home construction.

That's because new home builders can be overenthusiastic about future sales and
overbuild. They can also cut prices to force sales. Individual homeowners must follow
the market's supply and demand. They don't have the clout to manipulate the market.
NAR provides the current housing market statistics.

Real Estate Investing

Everyone who buys or sells a home engages in real estate investing. That means you must
consider several factors. Will the house rise in value while you live in it? If you get a mortgage,
how will future interest rates and taxes affect you?

Many people do so well with investing in their homes they want to buy and sell homes as a
business. There are many ways to do that. First, you can flip a house. That's where you buy a
house to improve then sell it. Many people own several homes and rent them out. Others use
Airbnb as a convenient way to rent out all or part of their homes. You can rent vacation homes
using VRBO or Home Away.

Real estate investing is one of the best way to increase wealth. If you want to increase your
investments in the USA then get in touch with one of the best real estate guide Reed Goossens.

The term real estate means real, or physical,property. “Real” comes from the Latin root res, or things.
Others say it's from the Latin word rex, meaning “royal,” since kings used to own all land in their
kingdoms.
Get start your real estate investments USA with little money. Invest little and increase more. with
real estate investing you become a top real estate investor in real estate market.

In English common law, real property, real estate, realty, or immovable property is land which is ...
The law recognizes different sorts of interests, called estates, in real property.
 CHAPTER 3

DEFINITION OF RESEARCH
According to Clifford Woody, research comprises defining and redefining problems, formulating
hypothesis or suggested solutions, collecting, organizing and evaluating data, making deductions and
reaching conclusion and further testing the conclusion whether they fit into formulating hypothesis.

RESEARCH METHODOLOGY

Research comprises "creative work undertaken on a systematic basis in order to increase the
stock of knowledge, including knowledge of humans, culture and society, and the use of this
stock of knowledge to devise new applications." It is used to establish or confirm facts, reaffirm
the results of previous work, solve new or existing problems, support theorems, or develop new
theories. A research project may also be an expansion on past work in the field. Research
projects can be used to develop further knowledge on a topic, or in the example of a school
research project, they can be used to further a student's research prowess to prepare them for
future jobs or reports. To test the validity of instruments, procedures, or experiments, research
may replicate elements of prior projects or the project as a whole. The primary purposes of basic
research (as opposed to applied research) are documentation, ((discovery, ((interpretation, or the
research and development (R&D) of methods and systems for the advancement of human
knowledge. Approaches to research depend on epistemologies, which vary considerably both
within and between humanities and sciences. There are several forms of research: scientific,
humanities, artistic, economic, social, business, marketing, practitioner research, life,
technological etc.

Research has been defined in a number of different ways:

A broad definition of research is given by (Godwin Colibao:

"In the broadest sense of the word, the definition of research includes any
gathering of data, information, and facts for the advancement of knowledge ."

Another definition of research is given by John W. Creswell, who states that

"Research is a process of steps used to collect and analyze information to increase
our understanding of a topic or issue". It consists of three steps: pose a question,
collect data to answer the question, and present an answer to the question."

The Merriam-Webster Online Dictionary defines research in more detail as

"A studious inquiry or examination; especially investigation or experimentation

aimed at the discovery and interpretation of facts, revision of accepted theories or
laws in the light of new facts, or practical application of such new or revised
theories or laws"

Research Design
A research design is the set of methods and procedures used in collecting and analyzing
measures of the variables specified in the research problem research. The design of a study
defines the study type (descriptive, correlational, semi-experimental, experimental, review, meta-
analytic) and sub-type (e.g. descriptive-longitudinal case study), research problem, hypotheses,
independent and dependent variables, experimental design, and, if applicable, data collection big
black c methods and a statistical analysis plan. Research design is the framework that has been
created to find answers to research questions.

Types of Research Design

There are many ways to classify research designs, but sometimes the distinction is artificial and
other times different designs are combined. Nonetheless, the list below offers a number of useful
distinctions between possible research designs. A research design is an arrangement of
conditions or collections.

Descriptive (e.g., case-study, naturalistic observation, survey)

Correlational (e.g., case-control study, observational study)

Semi-experimental (e.g., field experiment, quasi-experiment)

Experimental (experiment with random assignment)

Review (literature review, systematic review)

Descriptive Research Design

Descriptive research is a study designed to depict the participants in an accurate way. More
simply put, descriptive research is all about describing people who take part in the study.

There are three ways a researcher can go about doing a descriptive research project, and they are:

 Observational, defined as a method of viewing and recording the participants

 Case study, defined as an in-depth study of an individual or group of individuals
 Survey, defined as a brief interview or discussion with an individual about a specific
topic.
Correlational Research Design

A correlation is simply defined as a relationship between two variables. The whole purpose of
using correlations in research is to figure out which variables are connected. simple definition is
the basis of several statistical tests that result in a correlation coefficient, defined as a numerical
representation of the strength and direction of a relationship.

Experimental Research Design

Experimental design is the process of planning a study to meet specified objectives. Planning an
experiment properly is very important in order to ensure that the right type of data and a
sufficient sample size and power are available to answer the research questions of interest as
clearly and efficiently as possible.

Research Design of Project:

The research design of the project is descriptive research design.

Descriptive research is used to describe characteristics of a population or phenomenon being

studied. It does not answer questions about how/when/why the characteristics occurred. Rather it
addresses the "what" question (situation being studied?). The characteristics used to describe the
situation or population is usually some kind of categorical scheme also known as descriptive
categories. For example, the periodic table categorizes the elements. Scientists use knowledge
about the nature of electrons, protons and neutrons to devise this categorical scheme. We now
take for granted the periodic table, yet it took descriptive research to devise it. Descriptive
research generally precedes explanatory research. For example, over time the periodic table’s
description of the elements allowed scientists to explain chemical reaction and make sound
prediction when elements were combined.

Hence, descriptive research cannot describe what caused a situation. Thus, descriptive research
cannot be used as the basis of a causal relationship, where one variable affects another. In other
words, descriptive research can be said to have a low requirement for internal validity. The
description is used for ((frequencies, averages and other statistical calculations. Often the best
approach, prior to writing descriptive research, is to conduct a survey investigation. Qualitative
research often has the aim of description and researchers may follow-up with examinations of
why the observations exist and what the implications of the findings are.

Descriptive research can be explained as a statement of affairs as they are at present with the
researcher having no control over variable. Moreover, “descriptive research may be
characterized as simply the attempt to determine, describe or identify what is, while analytical
research attempts to establish why it is that way or how it came to be.”

Descriptive research is “aimed at casting light on current issues or problems through a process of
data collection that enables them to describe the situation more completely than was possible
without employing this method.”

In its essence, descriptive studies are used to describe various aspects of the phenomenon. In its
popular format, descriptive research is used to describe characteristics and/or behavior of sample
population.

An important distinctive trait of descriptive research compared to alternative types of studies

relates to the fact that while descriptive research can employ a number of variables, only one
variable is required to conduct a descriptive study. Three main purposes of descriptive studies
can be explained as describing, explaining and validating research findings.

Descriptive studies are closely associated with observational studies, but they are not limited
with observation data collection method, and case studies, as well as, surveys can also be
specified as popular data collection methods used with descriptive studies.

Advantages of Descriptive Research

 Effective to analyze non-quantified topics and issues

 The possibility to observe the phenomenon in a completely natural and unchanged natural
environment
 The opportunity to integrate the qualitative and quantitative methods of data collection
Disadvantages of Descriptive Research

 Descriptive studies cannot test or verify the research problem statistically

 Research results may reflect certain level of bias due to the absence of statistical tests
 The majority of descriptive studies are not ‘repeatable’ due to their observational nature
Data Collection:

Data collection is the process of gathering and measuring information on targeted variables in an
established systematic fashion, which then enables one to answer relevant questions and evaluate
outcomes. Data collection is a component of research in all fields of study including physical and
social sciences, humanities, and business. While methods vary by discipline, the emphasis on
ensuring accurate and honest collection remains the same. The goal for all data collection is to
capture quality evidence that allows analysis to lead to the formulation of convincing and
credible answers to the questions that have been posed.

Primary data:

Primary data is the process of gathering data directly from original sources as opposed to
collecting information from research that others have done. Information can be obtained by
observation, by mail and telephone surveys, or by face-to-face interviews.

Secondary data:

Secondary data refers to data that was collected by someone other than the user. Common
sources of secondary data for social science include censuses, information collected by
government departments, organizational records and data that was originally collected for other
research purposes. Primary data, by contrast, are collected by the investigator conducting the
research.

Secondary data analysis can save time that would otherwise be spent collecting data and,
particularly in the case of quantitative data, can provide larger and higher quality databases that
would be unfeasible for any individual researcher to collect on their own. In addition, analysts of
social and economic change consider secondary data essential, since it is impossible to conduct a
new survey that can adequately capture past change and/or developments. However, secondary
data analysis can be less useful in marketing research, as data may be outdated or inaccurate.
Sources of secondary data

Secondary data can be obtained from different sources:

Information collected through censuses or government departments like housing, social security,
electoral statistics, tax records internet searches or libraries progress reports.

Collection of Secondary Data

The secondary sources can be classified into two categories via. Published and unpublished
sources.

A. Published Sources

Generally, published sources are international, national, govt., semi-Govt, private corporate
bodies, trade associations, expert committee and commission reports and research reports.

They collect the statistical data in different fields like national income, population, prices,
employment, wages, export, import etc. These reports are published on regular basis i.e.,
annually, quarterly, monthly, fortnightly, weekly, daily and so on. These published sources of the
secondary data are given below:

1. Govt. Publications:

The Central Statistical Organization (CSO) and various state govt. collect compile and publish
data on regular basis. Some of the important such publications are:

i) Indian Trade Journals

ii) Reports on Currency and Finance
iii) Indian Customs and Central Excise Tariff
iv) Statistical Abstract of India
v) Reserve Bank of India Bulletin
vi) Labour Gazette
vii) Agricultural Statistics of India
viii) Bulletin of Agricultural Prices
ix) Indian Foreign Statistics
 x) Economic Survey and so on.

2. International Bodies:

All foreign govts and international agencies publish regular reports of international significance.
These reports are regularly published by the agencies like;

i) United Nations Organization

ii) World Health Organization
iii) International Labour Organization
iv) Food and Agriculture Organization
v) International Bank for Reconstruction and Development
vi) World Meteorological Organization.

3. Semi Govt. Publications:

Semi govt, organizations municipalities, District Boards and others also publish reports in
respect of birth, death and education, sanitation and many other related fields.

4. Reports of Committee and Commissions:

Central Govt, or State Govt, sometimes appoints committees and commissions on matters of
great importance. Reports of such committees are of great significance as they provide
invaluable data. These reports are like,

i) Shah Commission Report,

ii) Sarkaria Commission Report and
iii) Finance Commission Reports etc.

5. Private Publications:

Some commercial and research institutes publish reports regularly. They are like:

i) Institutes of Economic Growth, Stock Exchanges,

 ii) National Council of Education Research and Training (NCERT),
iii) National Council of Applied Economic Research (NCAER) etc.

6. Newspapers and Magazines.

Various newspapers as well as magazines also do collect data in respect of many social and
economic aspects. Some of them are as:

i) Economic Times
ii) Financial Express
iii) Hindustan Times
iv) Indian Express
v) Business Standard
vi) Economic and Political Weekly
vii) Main-stream Kurukshetra Yojana etc.

7. Research Scholars:

Individual research scholars collect data to complete their research work which further is
published with their research papers.

B. Unpublished Source

There are certain records maintained properly by the govt, agencies, private offices and firms.
These data are not published.

Limitations of Secondary Data

One should not use the secondary data without care and precautions. As such, secondary data
suffers from pitfalls and limitations as stated below:

1. No proper procedure is adopted to collect the data.

2. Sometimes, secondary data is influenced by the prejudice of the investigator.

3. Secondary data sometimes lacks standard of accuracy.

4. Secondary data may not cover the full period of investigation.

Advantages of Secondary data

 It is economical. It saves efforts and expenses.

 It is time saving.
 It helps to make primary data collection more specific since with the help of secondary
data, we are able to make out what are the gaps and deficiencies and what additional
information needs to be collected.
 It helps to improve the understanding of the problem.
 It provides a basis for comparison for the data that is collected by the researcher.

Disadvantages of Secondary Data

 Secondary data is something that seldom fits in the framework of the marketing research
factors. Reasons for its non-fitting are
 Unit of secondary data collection-Suppose you want information on disposable income,
but the data is available on gross income. The information may not be same as we
require.
Evaluation of Secondary Data

Because of the above-mentioned disadvantages of secondary data, we will lead to evaluation of

secondary data. Evaluation means the following four requirements must be satisfied: -
Availability- It has to be seen that the kind of data you want is available or not. If it is not
available, then you have to go for primary data.

Relevance- It should be meeting the requirements of the problem. For this we have two
criteria: -

 Units of measurement should be the same.

 Concepts used must be same and currency of data should not be outdated.

Accuracy- In order to find how accurate, the data is, the following points must be considered: -

 Specification and methodology used;

 Margin of error should be examined;
 The dependability of the source must be seen.

Sufficiency- Adequate data should be available.

CHAPTER 4
IMPACT OF DEMONETIZATION ON REAL ESTATE
Demonetization is effecting and will affect the sectors in special which involve a lot of cash and
Black Money and it has been customarily seen that Real estate has a very high engrossment of
black money and cash transactions. The opinions regarding changes in prices of real estate
suggestively varies as real constructer community assures steady prices to be maintained in the
market whereas a significant postulation of wiping out more than eight lac crore rupees in the
same market is being estimated with a record change of more than thirty percent. Though it
haven’t found instant impact of demonetization sharply influencing the said sector because the
real estate does not portray emergency supply or demand. Mostly until the time the owners are
satisfies with the selling prices they do not sell out of the property unless they just have to get rid
of it. On the contrary the buying pattern of property in India is very strategic and until severe
emergency none of the buyers buy property until they are themselves satisfied with the price.
Times Report more than seven percent of the people who has made up their mind to buy property
have changed it and rather opted for rented property after the demonetization broke into the
economy. The recorded ratio rate earlier was 1:1.1 and now the ratio has been recorded to be
1.1.6 respectively which implies that people are more likely to opt for rental apartment after the
advent of the epic demonetization in the Economy. Nobody wants to take a big investment
decision in a distress situation like this but if prices are less people will definitely take full
advantage of the situation.

Statistics reveal more than sixty percent of the amount is compensated through cash to purchase
a property in India and maximum the time publics employ their black money in the real estate
speculation. Consequently demonetization will decrease the property prices in India. The
housing bazaar is a hothouse for the undiscriminating use of black money and many homebuyers
and developers assert on having cash as a constituent of disbursement in real estate agreements.
PRE AND POST DEMONETIZATION SITUATION OF REAL ESTATE IN
INDIA

The Property Sector in India had been facing challenges since a couple of years yet the beginning
of the year 2016 recorded a significant change in terms of positive growth rate of the real sector
in the Indian Economy. This mainly attributed to the structural changes in the Indian Economy,
growth rate, positive socio economic and political environment etc. India had been emerging as a
strategically well planned nation with its new budgetary schemes of smart cities, housing for all
till 2020 and ATAL MISSION FOR REJUVENATION AND URBAN TRANSFORMATION
(AMRUT) which boosted growth in real sector in India during the recent past. Positivity was
induced in the economy regarding buying and selling properties and lowering of prices,
availability of loans and increasing income drove the buyers and sellers to act in the marketplace
along with the investors. There were some unsold inventories altogether because of a sheer
supply and demand incongruity one of the reasons being the residential market being inundated
with schemes that were affluent, against the requirement for more reasonable and affordable ones
. More and more attractive schemes were offered by the builders in order to liquidate their
holdings which included their collaboration with financial institutions. In order to help buyer
more affordable loans and schemes were offered in collaboration with the financial institutions
altogether. This had began reimbursing. More disposing off of inventory housing was the basic
focus of the builders here during this period of pre demonetization. Also, outfitting to the
demand of inexpensive housing, new unveilings started concentrating on that subdivision instead
of accommodating to the high-end suburban sector.

Post Demonetization was pretty unique in terms of advent of an Economic Event which in turn
led to a considerable amount of confusion rumor and uncertainty in terms of real estate sector
analysis. The media had created a big Buzz about the shut down or slow down of the so called
“Builder Dukan” just as a reaction to slowdown of economic activities in the economy. The
immediate shock had been registered but the gradual yet steady recovery is definitely not
publicized. It is not true that the real estate sector had not been affected but the affect was not so
dramatic to panic about. A sector which contributes five to six percent of the countries GDP
needs a fair analysis in terms of a punch bag and how it has so far reacted to the shock offered
by the recent economic activity. Shortage of cash drove away a large amount of buyers from the
market and so many happening deals were called off. Rumors say that prices might reduce
considerably giving buyers a fair opportunity to grab the deal yet the enormousness of real
reduction has not been able to estimate so far. The reduction in use of cash has curbed black
money and now hopefully the inflated bubble if ever existed in certain kind of property will be
controlled whatsoever. Most finances will be done by financial institutions and in case of ready
to move in homes huge changes wont appear altogether. After demonetization, home loan rates
have reduced with an expectation to reduce further which opens doors and windows of buying
opportunities in this market. Anuj Puri, Chairman of JLL India quoted that the deals by home
loan players are very transparent and limited impact will be noted in larger cities nevertheless the
two or three tier cities will be effected due to involvement of lot of cash.

Post declaration of demonetization, a misleading perception has rose in the country regarding the
real estate sector. If the long term effect of this step is seen then it can be concluded that the
sector will witness a positive change. This shift will allow the sector to enjoy a more transparent
and organized environment, thus, providing many reasons for the home buyer to go happy. This
article is a successful compilation of the top five such reason that will lead to this happiness and
will make you think that this is the right time to invest in the property.

Lower Home Loans:

With demonetization, the flow of money from the organized sectors and small scale industries to
banks has increased which has led to huge deposits. This has opened a new way through which
people will be able to get home loans at very low rates.

This liquidity will bring stabilization in price and the market will turn positive for buyer. Also,
the bank along with the liquidity of money will convert the repo rate into lower borrowings for
home loans.
Resuming the Held Projects:

Those projects that were delayed due to cash crunch will pick up the speed. Moreover, this flow
of cash will allow the real estate sector to avail loans from the banks at better rates in comparison
to what was offered in the past.

Investment in Infrastructural Development:

This step will increase the collection of steps and thus the government will get more exposure so
as to invest in this sector, leading to the infrastructural development of the country. After
granting connectivity to those who have invested in the projects related to affordable housing
will gain from the development

Rise of Transparent Process for Home Buying:

With demonetization, a huge shift has been seen towards a cashless economy. All the
transaction, now being done though card, will not only bring ease but also transparency.

With all the above discussed steps, it can be ruled out that the buyers must make the most of this
opportunity. Since, one can get easy financial aid, therefore this is the perfect time to invest in
the real estate sector.

Effect on parallel economy: The removal of these 500 and 1000 notes and replacement of the
same with new 500 and 2000 Rupee Notes is expected to – remove black money from the
economy as they will be blocked since the owners will not be in a position to deposit the same in
the banks, – Temporarily stall the circulation of large volume of counterfeit currency and – curb
the funding for anti-social elements like smuggling, terrorism, espionage, etc.

. Effect on Money Supply: With the older 500 and 1000 Rupees notes being scrapped, until the
new 500 and 2000 Rupees notes get widely circulated in the market, money supply is expected to
reduce in the short run. To the extent that black money (which is not counterfeit) does not re-
enter the system, reserve money and hence money supply will decrease permanently. However
gradually as the new notes get circulated in the market and the mismatch gets corrected, money
supply will pick up.

. Effect on Demand : The overall demand is expected to be affected to an extent. The demand in
following areas is to be impacted particularly the Consumer goods · Real Estate and Property
· Gold and luxury goods · Automobiles (only to a certain limit). All these mentioned sectors are
expected to face certain moderation in demand from the consumer side, owing to the significant
amount of cash transactions involved in these sectors.

. Effect on Prices : Price level is expected to be lowered due to moderation from demand side.
This demand driven fall in prices could be understood as follows:

Consumer goods: Prices are expected to fall only marginally due to moderation in demand as use
of cards and cheques would compensate for some purchases.

Real Estate and Property: Prices in this sector are largely expected to fall, especially for sales of
properties where major part of the transaction is cash based, rather than based on banks transfer
or cheque transactions. In the medium term, however the prices in this sector could regain some
levels as developers rebalance their prices (probably charging more on cheque payment).

. Effect on various economic entities: With cash transaction lowering in the short run, until the
new notes are spread widely into circulation, certain sections of the society could face short term
disruptions in facilitation of their transactions. These sections are: · Agriculture and related
sector · Small traders · SME · Services Sector · Households · Political Parties · Professionals
like doctor, carpenter, utility service providers, etc. · Retail outlets

However in the long term, though, this is likely to drive several benefits for the economy. India
has made the first move from cash economy to a digital economy. Larger amount of savings and
cash will find a way into the mainstream economy and be deployed for physical and financial
asset creation. Use of digital currency and payment systems driven by UPI, wallets and cards
will create enormous transparency and paves way for faster evolution of Fintech companies in
India especially in transactions and Online lending space. But however it needs to be accepted
that the caricatured version of black money driving Indian real estate is no longer applicable.
APPROACHING AN ANGLE

Real estate is also witnessing withdrawal of foreign funds due to globally impacting events like
Trump’s selection as the President of United States of America which ensured high bond prices
and in turn withdrawal of foreign funds impacting the equity and real estate. . Prices are
gradually going down ultimately leading to the dream come true of our Prime Minister (Housing
for All) to actually come true in a matter of two years span.

AN INCLUSIVE IMPACT

The passing of Real Estate Regulation and Development Act 2016 , Benami Act and
Demonetization will make the sector strong and transparent sucking out its bubble altogether.
The good news for end users is as such they will get their properties with no extra cash involved
in terms of black money and they might also get properties of their choice at reasonable and
affordable prices.

Housing sales were hit badly and prices fell post demonetisation but the realty sector benefited
from the move as it led to greater transparency in the market, say property developers and
consultants.

Land and luxury housing deals were severely affected after the demonetisation of Rs 500 and Rs
1,000 notes, announced on November 8 last year, as such transactions generally involved black
money component.

A step forward has been taken and the vision is to make India a USD 10-15 trillion economy,
DLF CEO Rajeev Talwar said when asked about the impact of notes ban.

"The step taken last year should have been named e-monetisation," he added. He said the
positive impact on real estate is that "now even secondary transactions have converted to
banking channel as there is no cash available".
Talwar said the housing sales have been down for last 4-5 years and it is not because of
demonetisation. The approval process for real estate projects needs to be streamlined for faster
execution, he said.

NAREDCO President Niranjan Hiranandani said that past one year not only witnessed
demonetisation but also other big policy developments like the implementation of RERA as well
as taxation reform, GST.

"To be honest, all of these have had their own share of teething troubles, but fortunately so far
things are under control," he said.

"Demonetization has led to greater efficiencies and transparency in the real estate sector and we
welcome this," he added. Hiranandani said the net impact of demonetisation, Real Estate
Regulatory Act (RERA) and the Goods and Services Tax would be positive, leading to increased
transparency and accountability in the sector.

CBRE Chairman (India & South East Asia) Anshuman Magazine said: "While it
(demonetisation) did result in some short-term pain for the sector there has been no long term
negative impact." The demonetisation coupled with RERA and GST has boosted investors’
confidence, he added.

"Residential transactions initially fell but are coming back. Overall, it has proved to be a good
move for the sector," Magazine said. Knight Frank India Chairman and Managing Director
Shishir Baijal said that a year back when the government decided to derecognise high
denomination currency, momentum in the real estate sector came to a grinding halt.

"There was widespread heartburn across stakeholders but somewhere the industry was hopeful
about a greater good in store," he said.
CHAPTER 5
DATA ANALYSIS AND CONCLUSION
Real estate is a complex, opaque market; how prices move in the next few months would depend
on how several price — drivers play out in this period — supply, sentiment, interest rates, rental
yields, transaction volume, etc. I’m no astrologer, and will therefore, not attempt to hazard a
guess on how much property prices would move in the next few months. Instead, we’ll look at
hard data and evaluate trends in real estate as they are actually playing out. To do this, we looked
at Magicbricks’ data over the last 5 weeks and asked our data sciences team to glean out insights.
And presented here are 4 observations on the actual fallout, post demonetisation. Do remember
that this is a market in transition, and we expect these trends to develop over time.

“Asking Price” from owner/landlord segment drop by 4%, at a Pan-India Level

Prices in the secondary market have fallen by only 4% at an aggregate level (when compared for
the post Nov 8 period vs pre-Nov 8). Seen at a city-level, the drop is up to 5% in Bangalore.
Landlords therefore seem to be largely holding onto to prices and there is no evidence yet of any
knee-jerk fall in prices. In the primary markets, developers have bundled deals to attract buyers
and refrained from giving outright cash discounts (so far).

The hypothesis that prices would tumble instantly post demonetisation hasn’t played out so far.
This serves as a reality-check; it is illuminating to note that sellers can defer selling until they are
happy with the price their property fetches. Only in a scenario wherein properties has to sell in a
limited time-frame, or a distress situation, are we likely to see any structural fall in prices across
the board. So far, the market is holding up.
Supply of properties posted by owners dips by 11%

We find a 11% drop in supply of new owner properties for sale, post demonetisation. Further
reinforcing the observation that some sellers, probably with high holding power, have deferred
their decisions to sell. When you break this down at a budget-level, the data suggests that
properties in the <50Lacs segment are less impacted with a 7% drop in supply volume; and
properties >1cr have seen a 17% drop in supply volume. This corroborates with the fact that
segments with low-cash are seeing much less drops in supply as compared to higher-budget
segment where cash played a relatively larger role.

It would have put huge downwards pressure on property prices if we had seen an increase in
supply, with more sellers wanting to exit their holdings in current market conditions. A drop in
supply is not good news for those advocating that prices would take a quick tumble. That Real
Estate has been more resilient has perhaps to do with the fact that most buyers in the past few
years have been end-users and not investors who might have dumped their holdings en-masse.
Additionally, it is also interesting to note that we haven’t seen any major changes in the deletion
of active listings i.e. sellers who were already in the market haven’t taken their properties off the
market yet, they remain active sellers. What this means is that there are fewer fresh sellers
entering the market as compared to pre-Nov period.

7% of
buyers have shifted from “Buying” to now “Renting”, at a Pan-India Level

We have seen a shift in preference for about 7% buyers whose initial choice was to buy a
property but are now looking for rental options after demonetisation. These buyers are choosing
to go for a rental solution in the interim period while they defer purchases for property as they
wait and watch how the pricing/supply unfolds. The other interesting insight is that the ratio of
rent seekers: buyers have changed in this period. This ratio was 1:1.1 earlier and is now 1:1.6;
indicating that there is relatively more demand for rental segment in this period. This will be an
interesting trend to watch out for. In the short term however, rental demand is likely to increase
leading to a possible hardening of rental yields (subject to inflow of rental supply of course).
Status-quo prevails in the primary market, as of now

There has been an insignificant 1% downside in primary market prices, ranging from a 5% dip in
some cities to an actual 5% increase in some others. This is unsurprising given the intention of
the builder community to hold prices. While there are several projects where developers are
running schemes, there is no evidence of any structured fall in prices as yet. Our market
intelligence suggests that transactions have fallen, even steeply, in several markets but whether
that will lead to any fall in prices is not evident yet. It is noteworthy that in the last 2 years there
has been a significant drop in transactions in the primary market; but that led to prices
stagnating, but not falling. It is important to watch how trends in the primary market develop
since this market, more often than not, also lends direction to the resale market.

In
conclusion – This is a market that’s trying to find its feet. The faster it does so, and the faster we
hit the new normal, the better it will be for all stakeholders in the industry. One of the key factors
that would enable this would be the “price/data availability” to buyers/sellers alike. The
transparency that availability of pricing data, plus supply/demand data brings in, would enable
buyers and sellers to take decisions more swiftly and with more confidence. We’re going to do
our bit to facilitate this. Our recent launch of Price Flash Engine, our tools like PropWorth, are
intended to achieve this objective.

In parting, here are a few suggestions to market participants. For buyers, you would do well to
remember that this is an absolutely great time to be a buyer. Buyers should get more active,
shortlist properties they are interested in & negotiate/make offers to sellers – remember that it is
a buyers’ market and, if you’re a serious buyer, you stand a very good chance to negotiate a good
deal for yourself. For builders, it would be beneficial to bump up volumes. Consider offering “
floating prices” in which buyers can buy with confidence that should prices fall, they will get the
benefit of lower prices later. Sellers should also know that real estate is a very aspirational
category, there is a lot of underlying demand, but being obstinate about pricing and allowing
volumes to drop is likely to be counter-productive. Top builders can further consider running
sales promotions to entice buyers back in the market.
CHAPTER 6
FINDINGS AND SUGGESTIONS
FINDINGS

While the demonetization initiative by the Central government means further delays in
ongoing real estate projects due to the massive cash crunch, it also paves the way for a
cleaner and more transparent real estate industry in the times to come. Developers will now
look for alternative funding arrangements while end-users or investors will wait for more
certainty before making any move. Let’s delve deeper into the impact of this change on real
estate sector in short to long term.

1) Short-term: Market to undergo a slow down

The sudden ban on Rs 500 and Rs 1000 currency notes has resulted in a situation of
limited or no cash in the market to be parked in real estate assets. This has subsequently
translated into an abrupt fall in housing demand across all budget categories in the short
term. While a share of this dwindled demand could be attributed to distractions caused by
the move, many industry experts opine that this is a result of a trust deficit in the market.
Money has become dearer, leading to cautious spending and minimal transactions.

The slowdown owing to this announcement has been more severe in NCR particularly
Gurgaon, Mumbai Metropolitan Region (MMR) and certain Tier II markets such as Surat
and Vadodara. Minimal impact of demonetisation has been felt in markets such as
Bangalore, Pune and Chennai, which are primarily end-user driven and rely on bank
funding.
Liquidity has been severely impacted and this would result in a deflation with limited
sales over the next three months. In short, the move has taken the real estate sector by a
storm, and it would take time for all stakeholders in the sector – brokers, buyers, owners
and developers - to assess its repercussions on their businesses and decisions.

In particular, transactions in the premium housing sector and the residential land category
– overtly dependent on the cash component - would come to a standstill in the short
term.

In the short term, buyers and sellers in the middle of transactions might be impacted as
cash component would be involved in such deals.
There would be intermittent delays in the execution of ongoing residential and
commercial projects primarily owing to the massive cash crunch and minimal trading in
the economy.
2) Mid-term Impact: Reduced inflation, better home ownership
appetite, improved rental landscape

With limited money floating in the economy, the inflation rates are expected to fall in the
next 2-3 quarters. This, coupled with key policy developments such as speculative repo
rate cuts by the Reserve Bank of India (RBI), could mean a better home ownership
appetite. However, this could be restricted to the affordable housing category.

The heavily cash-dependent secondary market could bear a colossal brunt of the
demonetisation move. With the gap between circle rates and market rates bridging,
owners would reduce ‘ask’ prices, impacting the average housing prices across cities.
Resale properties would, thus, become cheaper and this could pressurise the primary
market, as well. Developers might offer new projects at discounted rates or propose
incentives to magnetise buyers.

The dwindling demand for housing could benefit the rental market across metros but the
change might take a year or so to manifest its impact on the rental price points. Both
commercial and residential markets could see rentals going north by 10-20 percent.

In the midst of all these developments, affordable housing will remain largely unaffected
due to their non-dependence on the cash component. In fact, the demand for this category
might witness an uptrend due to improved purchasing power.
3) Long-term impact: Transparency, revived trust and capital inflows in
the realty sector

The real estate sector is expected to get cleansed of its ailments in the due course of time
owing to the elimination of black money clubbed with multiple regulatory changes such as
the Goods and Services Tax Act, Real Estate (Regulation and Development) Act and
amendment of the Benami Transactions (Prohibition) Act. Subsequently, project approvals
will be quicker, resulting in a substantial reduction in the total cost of construction,
thereby, the ‘per unit’ cost. Fair pricing would mean a revived demand for new projects in
the market.

Demonetisation could also mean fresh sources of funding for developers to complete their
projects. Some of the alternate sources may include the following:

• Developers will be forced to clean up their balance sheets so that they can avail
funding from legitimate sources, however, this may come at extremely high costs from the
Non-banking financial companies (NBFC) segment.
• Developers can avail short-term loans from their existing buyers at market price with a
promise to deliver the project on time and at an interest rate as per the agreement in the
sales deed.
• Investments from private equity firms would usher positive sentiment across the
market, helping developers to source funding and strengthen end-user demand.

The real estate sector could witness a major revolution with cash transactions getting
eliminated and a major share of trades going online with the penetration of alternative
forms of payment such as E-wallets, apps and plastic money. To sum it up, the
demonization of old currency has ushered a new era for the real estate industry in India
 that would be transparent, corruption-free, organized and veracious.

SUGGESTIONS

Supporting Farmers:

Most of the farmers and tenants do not operate their bank accounts. They are habituated to do

most of their dealings in cash, they also keep cash at home. Due to wedding season, some of the

farmers have sold their land in recent times and have received cash payments. Keeping in view

these considerations, farmers may be allowed to deposit an appropriate amount and nominal

taxes only be imposed on such deposits.

- Supporting Small Businesses:

The informal sector (petty vendors/ small businesses of vegetables, fruit, poultry, meat, fish etc.)

in India is a large part of the economy. This sector operates mostly on cash basis with minimum

resort to banking transactions. This sector also needs to be provided with a facility of deposit of

appropriate amount with nominal tax, as a onetime measure.

- MSME Sector –

Allow upto 6 months to repay loan instalment before they are declared NPA.

- Supporting Poultry Industry:

Telangana has the largest poultry industry in India. Eggs and chicken are perishable. Most of the

chicken and egg business is cash based. Post demonetization, the business has dropped by 70%.

Moratorium of bank loans for two years may be examined by the GOI in consultation with

poultry industry associations.

- Increasing Cash Withdrawals in Special Cases:

Immediately, the withdrawal limits for small businesses may be raised to Rs one lakh and for

marriages to Rs 4 lakhs. The private hospitals should also be authorized to accept old notes. The

deadline of accepting old notes for Government payments, petrol pumps etc. may be extended

beyond November 24.

CONCLUSION

1. Demonetization event was an indispensable step which was guaranteed to bring with it a
remarkable move wherever black money has been involved and frolicker a key role.

2. For now, there is no intention for chief players of real estate who have shepherded their
transactions transparently and rightfully to freak in anxiety.

3. Over the coming years, the real estate sector in India will appear sturdier, healthful and
accomplished of protracted unrelenting growth and development.

4. Shri Narendra Modi Dream of “housing For All” will soon be fulfilled due to probable
decrease in prices and affordable real estate in a matter of eighteen months.

5. Due to demonetization, the flow of money from the organized sectors and small scale
industries to banks has increased which has led to huge deposits. This has opened a new way
through which people will be able to get home loans at very low rates.

6. Banks demand for bigger deposit (around 30%) and interest rates will also high for a loan for
residential property.

7. Somehow, most of the under-constructions projects came to a standstill. Metros such as Delhi,
Mumbai and Chennai were the worst affected at the time demonetization.

8. It’s good for the Indian real estate sector attracted all time high foreign investment of US $ 5.7
billion in 2016, despite demonetization (The Economic Times, 2017). Also the performance of
real estate firms on the stock market Bombay Stock Exchange (BSE) improved by 50% during
2016-17, dispelling fears of ill effects of demonetization.
CHAPTER 6
BIBLIOGRAPHY
BIBLIOGRAPHY

1) Internet
www.moneycontrol.com
www.financeworlds.com
www.economictimes.indiatimes.com
www.99acres.com
www.madhyam.com
2) Newspapers
Hindustan Times
The Indian Express