Modi’s demonetisation to hit real estate, jewellery sectors hardest - Hindustan Times
close_game
close_game

Modi’s demonetisation to hit real estate, jewellery sectors hardest

Hindustan Times | By
Nov 18, 2016 11:12 AM IST

The resale market in the real estate sector may be hit the most since many deals are made in cash. However, the demand in primary real estate may not drop since most buyers have got bank loans.

New Delhi

The resale market in the real estate sector may be hit the most since many deals are made in cash. However, the demand in primary real estate may not drop since most buyers have got bank loans.
The resale market in the real estate sector may be hit the most since many deals are made in cash. However, the demand in primary real estate may not drop since most buyers have got bank loans.

The government’s demonetisation of 500 and 1,000 currency notes will have a transitory impact on many asset classes such as real estate, jewellery, bonds, etc.

Now catch your favourite game on Crickit. Anytime Anywhere. Find out how

The resale market in the real estate sector may be hit the most since many deals are made in cash. However, the demand in primary real estate may not drop since most buyers have got bank loans.

“Short-term pain is inevitable when we look for any eventual long-term cure for the disease. There has, for long, been a strident demand to bring transparency in the sector ... and cash dealings must be dealt with first,” said Ashwinder Raj Singh, CEO, residential services, JLL.

“The luxury and high-end segments of residential real estate will be impacted the most. Luxury real estate prices could drop by up to 30% as sellers will struggle to offload properties to generate liquidity,” he adds.

Developers are also likely to face a serious fund crunch in the short to medium term, which may further delay some of the ongoing projects.

Gems and jewellery sectors also attract a lot of cash. The demand for gems and jewellery is expected to decline in the next two to three quarters. The unorganised segment will be the worst hit. Since people panicked, the domestic prices of gold rose, but these will be stable in the long run.

“The industry is bound to feel the pinch in the near term as around 80% of the gems & jewellery purchases in India are made in cash. Nevertheless, the demand for gold is likely to pick up in the long term. The organised jewellery retailers are benefitting from this structural change in the market,” says CRISIL report.

Gold imports through the unofficial channel are likely to fall. There will be no significant impact on jewellery exporters because it is mostly an organised market.

The note-scrapping will have a positive impact on the bond market. “Surge in deposits and improved liquidity in the banking system will create more demand for government bonds and other high-rated bonds and cause downward pressure on yields,” says Sunil Kumar Sinha, principal economist, India Ratings and Research.

“The RBI will continue to sterilise excess liquidity from the banking system to keep the short-term rates aligned with the policy rate,” he adds.

The stock market will also face downward pressure in the short term but will pick up in the long run. The change in purchasing power will also hit the micro, small and medium scale enterprises for the next few years. Short-term volatility is an opportunity for long-term investors to buy sound stocks.

Elevate your career with VIT’s MBA programme that has been designed by its acclaimed faculty & stands out as a beacon for working professionals. Explore now!

See more

Get latest updates on Petrol Price along with Gold Rate , Today Weather and Budget 2024 at Hindustan Times.

SHARE THIS ARTICLE ON
SHARE
Story Saved
Live Score
OPEN APP
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Monday, June 17, 2024
Start 14 Days Free Trial Subscribe Now
Follow Us On