{"id":10,"date":"2016-11-17T14:18:20","date_gmt":"2016-11-17T08:48:20","guid":{"rendered":"https:\/\/settlin.in/blog\/2016\/11\/demonetization-will-not-devalue-properties-in-bangalore-2010b616677b\/"},"modified":"2020-05-28T11:50:46","modified_gmt":"2020-05-28T06:20:46","slug":"demonetization-will-not-devalue-properties-in-bangalore","status":"publish","type":"post","link":"https:\/\/settlin.in/blog\/demonetization-will-not-devalue-properties-in-bangalore\/","title":{"rendered":"Demonetization will not devalue properties in Bangalore"},"content":{"rendered":"<p name=\"d5ac\" id=\"d5ac\" class=\"graf graf--p graf-after--h3\">The general consensus is that the real estate prices will correct themselves owing to the death of black money. But will that actually happen in Bangalore?<\/p>\n<figure><img decoding=\"async\" alt=\"Settlin\" src=\"https:\/\/cdn-images-1.medium.com\/fit\/c\/64\/64\/1*x4AO9xQY609LDKN6vXfshw.png\" \/><figcaption>Out of\u00a0Vogue?<\/figcaption><\/figure>\n<h3 name=\"152b\" id=\"152b\" class=\"graf graf--h3 graf-after--figure\">How is black money involved in Indian real\u00a0estate?<\/h3>\n<h4 name=\"f47a\" id=\"f47a\" class=\"graf graf--h4 graf-after--h3\">0\u201350% of the transactions are done in\u00a0cash<\/h4>\n<p name=\"8ddc\" id=\"8ddc\" class=\"graf graf--p graf-after--h4\">The municipality guidance value\/property rates are much lower than the actual sale price. So, if you are buying a property of 80 lakhs, you may be doing a registry for just 40 lakhs so that you can save on the stamp duties and registration charges. The remaining 40 lakhs is typically paid in cash, enabling consumer black economy.<\/p>\n<p name=\"96c6\" id=\"96c6\" class=\"graf graf--p graf-after--p\"><em class=\"markup--em markup--p-em\">For Bangalore, this figure is close to zero. Details below.<\/em><\/p>\n<h4 name=\"8495\" id=\"8495\" class=\"graf graf--h4 graf-after--p\">Investments in builder\u00a0projects<\/h4>\n<p name=\"8597\" id=\"8597\" class=\"graf graf--p graf-after--h4\">Bulk or business black economy is boosted by huge back door investments in realty projects\u200a\u2014\u200asimilar to us buying groceries without receipt. The money invested is kept off the records and in return, apartments are written off in dirt cheap \u201con record\u201d prices.<br \/>This kind of involvement has no direct relationship to the apartment prices though. The prices are mostly driven by the demand, which is bolstered by 1, i.e. the consumer black money.<\/p>\n<h3 name=\"0bce\" id=\"0bce\" class=\"graf graf--h3 graf-after--p\">De-monetization effect<\/h3>\n<p name=\"f25a\" id=\"f25a\" class=\"graf graf--p graf-after--h3\">Once the black economy is restricted, this 0\u201350% of the cash transactions (above and beyond the registration value) will definitely decrease. The new houses are quoting random figures, which may not be correct, but a decrease will be there, in general.<\/p>\n<blockquote name=\"de7b\" id=\"de7b\" class=\"graf graf--blockquote graf-after--p\"><p><strong class=\"markup--strong markup--blockquote-strong\">The key factor here is the guidance value. The price correction is all about the money that is being paid in cash during a sale transaction.<\/strong><\/p><\/blockquote>\n<h3 name=\"62ce\" id=\"62ce\" class=\"graf graf--h3 graf-after--blockquote\">What will happen in Bangalore<\/h3>\n<blockquote name=\"31b7\" id=\"31b7\" class=\"graf graf--pullquote graf-after--h3\"><p>Bangalore (the city area), will largely remain unaffected.<\/p><\/blockquote>\n<h4 name=\"4d28\" id=\"4d28\" class=\"graf graf--h4 graf-after--pullquote\">Factor 1<\/h4>\n<p name=\"c6a0\" id=\"c6a0\" class=\"graf graf--p graf-after--h4\">We have been involved in quite a few transactions in Bangalore, and we can tell you for a fact that the cash part in a sale transaction in main Bangalore, on an average is just 4%.<\/p>\n<p name=\"999e\" id=\"999e\" class=\"graf graf--p graf-after--p\">Let\u2019s churn some data,<\/p>\n<figure><img decoding=\"async\" alt=\"Settlin\" src=\"https:\/\/cdn-images-1.medium.com\/fit\/c\/64\/64\/1*x4AO9xQY609LDKN6vXfshw.png\" \/><figcaption>Out of\u00a0Vogue?<\/figcaption><\/figure>\n<p name=\"c426\" id=\"c426\" class=\"graf graf--p graf-after--figure\">So you can see how close the guidance value is to the actual quote price of the sellers. In cases, it even is lesser than what people are willing to sell at.<\/p>\n<h4 name=\"9c31\" id=\"9c31\" class=\"graf graf--h4 graf-after--p\">Factor 2<\/h4>\n<p name=\"dab4\" id=\"dab4\" class=\"graf graf--p graf-after--h4\">Another factor to be taken into account is the cost price for the sellers. A seller who invested in a property post 2012 has hardly gained anything today. We have had clients selling for a profit of less than 1% year-on-year. So from the buyer\u2019s perspective <strong class=\"markup--strong markup--p-strong\">if someone hopes for the prices to fall by 10%, when the current quote of the seller is hardly 8\u201310% over his original investment, hopes will remain hopes!<\/strong><\/p>\n<h4 name=\"454a\" id=\"454a\" class=\"graf graf--h4 graf-after--p\">Factor 3<\/h4>\n<p name=\"637d\" id=\"637d\" class=\"graf graf--p graf-after--h4\">Many banks provide loans on 80% of the Sale Deed Value (Registration) and not the actual Sale Value. Due to which, many buyers in the metros go for the full amount registration and hence avoid any cash transactions.<\/p>\n<h3 name=\"4cee\" id=\"4cee\" class=\"graf graf--h3 graf-after--p\">The Truth<\/h3>\n<p name=\"6c83\" id=\"6c83\" class=\"graf graf--p graf-after--h3\"><strong class=\"markup--strong markup--p-strong\">If you want a property for investment purposes, do wait<\/strong>.<br \/>Look for newly developed\/under-development areas in the outskirts <em class=\"markup--em markup--p-em\">where the guidance value is much lesser than the market value<\/em>. Price corrections will happen, and 6 months down the line you will be able to afford a much better property than today.<\/p>\n<p name=\"dceb\" id=\"dceb\" class=\"graf graf--p graf-after--p\"><strong class=\"markup--strong markup--p-strong\">But if you are looking to settle, do it today<\/strong>.<br \/>These prices will not decrease. They will follow their normal growth trajectory of 2\u20135%, and even more if the BBMP focuses on its whims. The 20\u201325% guidance price increase this year in April was focused on more taxation [<a href=\"http:\/\/www.microfinancemonitor.com\/bbmp-hikes-guidance-value-by-20-25-as-builders-struggle-to-sell-flats-in-bangalore\/41815\" data-href=\"http:\/\/www.microfinancemonitor.com\/bbmp-hikes-guidance-value-by-20-25-as-builders-struggle-to-sell-flats-in-bangalore\/41815\" class=\"markup--anchor markup--p-anchor\" rel=\"noopener noreferrer\" target=\"_blank\">source<\/a>], and the same may happen again next year.<\/p>\n<h3 name=\"b052\" id=\"b052\" class=\"graf graf--h3 graf-after--p\">More truth<\/h3>\n<p name=\"f454\" id=\"f454\" class=\"graf graf--p graf-after--h3\">People are afraid. Sellers are ready to sell their properties at a price lower than they were willing to yesterday. But tomorrow, once people see that the prices are not decreasing, they will regain confidence. Today is the day. Carpe diem!<\/p>\n<p name=\"93ed\" id=\"93ed\" class=\"graf graf--p graf-after--p\"><strong class=\"markup--strong markup--p-strong\">Addendum:<\/strong><\/p>\n<p name=\"6c96\" id=\"6c96\" class=\"graf graf--p graf-after--p graf--trailing\">People have started analysing these trends more. See:<br \/><a href=\"http:\/\/timesofindia.indiatimes.com\/city\/thane\/Price-correction-in-realty-market-not-a-possibility\/articleshow\/55532361.cms\" data-href=\"http:\/\/timesofindia.indiatimes.com\/city\/thane\/Price-correction-in-realty-market-not-a-possibility\/articleshow\/55532361.cms\" class=\"markup--anchor markup--p-anchor\" rel=\"nofollow noopener noreferrer\" target=\"_blank\">http:\/\/timesofindia.indiatimes.com\/city\/thane\/Price-correction-in-realty-market-not-a-possibility\/articleshow\/55532361.cms<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The general consensus is that the real estate prices will correct themselves owing to the death of black money. But will that actually happen in Bangalore? Out of\u00a0Vogue? How is black money involved in Indian real\u00a0estate? 0\u201350% of the transactions are done in\u00a0cash The municipality guidance value\/property rates are much lower than the actual sale [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","_coblocks_attr":"","_coblocks_dimensions":"","_coblocks_responsive_height":"","_coblocks_accordion_ie_support":"","footnotes":""},"categories":[17,9,15,16,2],"tags":[],"class_list":["post-10","post","type-post","status-publish","format-standard","hentry","category-home-buyers","category-investing","category-property","category-property-investment","category-real-estate"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Demonetization will not devalue properties in Bangalore - Settlin<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/settlin.in/blog\/demonetization-will-not-devalue-properties-in-bangalore\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Demonetization will not devalue properties in Bangalore - Settlin\" \/>\n<meta property=\"og:description\" content=\"The general consensus is that the real estate prices will correct themselves owing to the death of black money. 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