Real estate sector in India was facing a slump since a time period of 2-3 years, but thankfully a positive diversion took place in H1 2016. H1 2016 as compared to H1 2015 has seen an increase of 7% in volumes. Price regulation in the metro cities had proved to be beneficial as it resulted in increased sales and decreased inventory. Along with all this, buying second homes in India, which are popularly known as vacation homes, had also become a common trend.
The Note-Ban Impact
The effects of demonetization in real estate sector have been extremely negative in terms of prices and sales. Owing to the after-effects of demonetization, the sales volume came down by 9% in just two months. But thankfully, the residential part of the real estate sector in gaining pace at a steady rate. The consumers have bounced back in full force in the market and are keen on buying homes. But the exact situation is not applicable to the concept of buying second homes in India. The working of this sector has to be understood.
The Working
As the restriction was made on the currency with all the cash withdrawn from the market, the demand for second homes has increasingly gone down. The buyers, who are earning purely legal income or can afford to invest in second homes through legal channels, are the only people who are actually showing interest in buying second homes in India. The interesting thing is that even these people are hoping for the prices to reduce and the real estate sector in India to get a hold of itself.
Effects Of Budget
The effects of demonetization in real estate sector were still showing recovery, when the Budget 2017 hit the market with full force. This is because the tax benefits on buying second homes were capped by the government. The deduction was restricted at Rs.2 lakh, but a provision being given to carry forward the loss for 8 years. But people who want to enjoy the benefits of buying second homes in India will still face a loss.
To overcome the negative impact of tax benefits on buying second homes in India being capped, a sensible solution has to be taken up. These include analyzing the portfolio and managing the finances in a way that along with being able to enjoy the benefits of buying a second home, you are not facing any loss.
Situation In The Future
The effects of demonetization are visible in the primary market as well as the secondary market. A price of correction of 10-15% is also witnessed in the real estate, which can increase further also. But now all eyes and hopes are on RERA, as people are expecting a positive outcome after the implementation of RERA.
