Demonetisation Anniversary: Good or bad?

India Infoline News Service | Mumbai | November 08, 2017 09:45 IST

It is now a year after the event and, on reflection, I feel that the impact for the banks has been largely positive. Besides the fact that banks picked up deposits, during the demonetisation drive, a lot of small loans got paid off, many of which were sticky.

Last year on November 8th Prime Minister Narendra Modi announced regarding demonetizing 86% of the country’s old currency overnight. The economy experienced a speed breaker with the advent of demonetization and the after effect of the same.

Following are some views on impact of Demonetisation:
“Demonetisation was definitely a bold and timely move. Prime Minister Narendra Modi announced this exercise a year ago and we have seen a considerable impact in the year that followed. The main objective of bringing unaccounted money within the system and widening the tax base will definitely impact the economy positively going forward by making activities more formal and accountable. According to me, the most crucial outcome of demonetization is that it showed that India is ready to accept change, if it is done for reforming the Indian economy. A secondary benefit is that Demonetisation created an acceptance and awareness about the digital channel among public at large. This will encourage and serve as a first step for Indian economy to become a world leader in adopting modern technologies. Demonetisation in retrospect, was one of the important stepping stones for introduction of GST which is going to formalize Indian economy even further and is clearly one of the largest reforms of any type undertaken by Government of India post independence.” said Ashishkumar Chauhan, MD & CEO of BSE.
“Past one year has been an eventful year and the real estate sector has experienced a roller coaster ride. There were ups and downs but fortunately things are on revival mode as of now.  Past one year not only witnessed demonetisation but also other big policy developments like implementation of RERA as well as big taxation reform like GST.  To be honest, all of these have had their own share of teething troubles but fortunately so far things are under control. Demonetisation has led to greater efficiencies and transparency in the real estate sector and we welcome this.  Just like their impact on honest taxpayers, these developments have helped the sector as well. The government’s vision of “Housing for All by 2022” has also helped the real estate sector in overcoming any possible adverse impact of demonetisation. Particularly, affordable housing sector has immensely benefited. With special incentives coupled with overall softening of interest rates, this segment is a ray of hope for the sector. Government’s vision of Housing for all by 2022 will go a long way in promoting the real estate growth in the country. Affordable housing is a segment which particularly gets benefitted from this initiative. This will create tremendous amount of opportunities for the sector and ultimately all the segments shall benefit. Government will surely look up to contribution even from the private developers to make this dream a reality with its newly launched PPP policy.  In India, real estate is the second largest employment generator and is slated to grow at 30 per cent over the next decade. The Indian real estate market is expected to touch US$ 180 billion by 2020. The housing sector alone contributes 5-6 per cent to the country's Gross Domestic Product (GDP).  The sector thus far has managed to stay afloat because of various government schemes introduced to incentivize Affordable Housing sector, but there is a growing need for tax rationalisation and some stabilization now.  We are aware that the implementation of GST and RERA, have added to the challenges of the real estate sector, but going forward, the net impact of these policies, would be positive and the sector should be able to witness a  enhanced sense of transparency and accountability.” said Dr. Niranjan Hiranandani, President, NAREDCO
“Demonetization was undoubtedly a landmark event in the history of our economy. The aim of demonetization was to curb the use of black money, but the cash crunch it caused contributed to significantly lower real GDP growth in the subsequent quarter. However, the more significant blow to the economy was dealt by policies that followed demonetization. While the economy was trying to pull itself out from demonetization, confusion over implementation of Real Estate Regulation Act (RERA) and the Goods and Services Tax (GST) caused further widespread disruption in the short term again. To put things in perspective, in the last one year we have lost almost six months owing to the disruptions caused by implementation of policies within a short span of each other. It also contributed more to the economic weakness that we are witnessing currently and created confusion in all the sectors which hampered growth. The primary residential market and projects undertaken by credible and reputed builders were not affected significantly by demonetization. Transactions in these markets are broadly financed through legal channels of banks and housing finance institutions providing home loans to buyers. Only in projects where cash component was involved and those in the secondary market have been affected.

The residential sector was more impacted because of the state wide implementation of GST and RERA. Developers got busy in registering their projects under RERA and buyers as well decided to be in a wait-and-watch mode which hampered growth in the sector and led to loss of sales for six months. The implementation of GST without having the necessary infrastructure had a negative impact on the ancillary industries connected to the real estate sector.
Coming to the positive impact, the transparency and accountability in the sector has enhanced significantly for institutional investors due to which they are looking at Indian Real Estate with renewed interest. The ongoing transformation is already witnessing a robust rise in investment inflow from both foreign and domestic institutional investors.
The long term market dynamics for the sector are positive, especially in the residential market where prices are likely to remain stable over the coming few months. There hasn’t been a significant dip in prices in the primary market in the recent past, as margins are very thin, however, there has been some rationalization in the secondary market. We could also see much awaited legal reforms happening in the sector. The implementation of title insurance will lead to renewed confidence among buyers and will definitely impact the real estate market favorably.” said Surendra Hiranandani, CMD, House of Hiranandani.

“The economy experienced a tiny speed breaker with the advent of demonetisation and the after effect of the same was felt in the real estate sector as well. In its opening phase, demonetisation disrupted the overall real estate business across the country impacting (new) launches, sales, and enquiries.  However, post the initial jolt, the Southern real estate sector and especially the Bengaluru market, observed a steady rise in customer enquiries out of which many turned out to be positive leads. With the renewed consumer confidence in the last quarter of FY 16-17 (January –March 2017) the Bengaluru market continued to remain stable versus other cities. Being an end-user driven market and backed by white collar job prospects, it promises for better times ahead for the Bengaluru real estate industry.”, said Ashish R. Puravankara, M.D., Puravankara Limited.
“It is now a year after the event and, on reflection, I feel that the impact for the banks has been largely positive. Besides the fact that banks picked up deposits, during the demonetisation drive, a lot of small loans got paid off, many of which were sticky. A spinoff from demonetisation has been the overall increased emphasis on digital transactions and that channel has seen manifold growth.” said Parthasarathi Mukherjee, MD & CEO, Lakshmi Vilas Bank.
“Post demonetisation, there has been a sharp rise in the number of offerings that cater to peer-to-peer payments, merchant payments and bill payments. Now, consumers can choose from mobile banking apps, payment wallets, government promoted BHIM, bank specific UPI apps and private player UPI apps like Tez, PhonePe, etc. Demonetisation has also ushered in faster adoption of changes in the infrastructure technology to facilitate quicker and smoother execution of these transactions. Initiatives such as UPI, BharatQR, BBPS and AEPS are facilitating standardisation of payment services and improving the interoperability across financial entities.” said Sundararajan, Executive Director, i-exceed.
"Demonetization has ushered in an era of cashless e-commerce economy as we saw concomitant reduction in cash flow. Coupled with GST, the unorganized sectors have taken a brunt even as the smaller players who have had the right foresight who have worked towards being compliant are reaping the rewards.” said Sunil Gupta, Director,
“The overall impact of Demonetisation has been positive as people have renewed faith in cashless payments. CashKaro too saw a small dip in traffic right after Demonetisation but, things normalized soon after and we actually saw a growth in transactions. Among those who now prefer paying online, 54% pay via debit/credit cards, 30% pay via wallets like Paytm, Freecharge, MobiKwik etc., and 6% use NetBanking and UPI. Interestingly, 80% of the respondents claimed that they have introduced either their family or friends to cashless payments post Demonetisation. Most respondents introduced shoppers to wallet based payment. The ease of use and instant money transfers facilitated by mobile wallets has made them a popular mode of payment.” said Rohan Bhargava, Co-founder
“Despite the slowdown in the initial phase, demonetisation had a major positive impact on the real estate sector and turned out to be a blessing in disguise in the medium-to-long term, especially for buyers of mid income and affordable apartments. Although it had a huge impact on both primary and resale real estate transactions in November and December 2016, with sales dropping by 40%, one of the key benefits of demonetization was a reduction in base rates by 1% for almost all banks. Post January 2017, the overall sentiment of the industry has taken an uptake which is visible in the number of units sold in Jan – Mar’17 quarter at ~51,000 units against ~54,000 units sold in Jul – Sep’16 quarter. These facts and figures clearly indicate that in the near future the sector will be propitious and will fetch the best of the results in all times.” said Ankur Dhawan, Chief Investment Officer,
“In spite of its initial hiccups in the first quarter of demonetization, the government’s move immensely boosted the digital advertising eco-system within one year of its implementation. As the traditional forms of advertising were cash heavy, brands and advertisers were initially pushed towards digital advertisement platforms; the latter being a near cashless model of advertisement. Realizing the reach and impact of online advertising, there was an air of changing sentiments in the minds of brands, advertisers and consumers towards digital advertising. The online advertising industry witnessed a boost within the first few months of demonetisation, where brands and advertisers increased 40% of their ad spend towards digital advertising, moving off from traditional medium to digital ad space. With demonetisation, there has also been a major boost in digital payment platforms to the tune of billions. This created more avenues for digital ads to reach out to the consumers, impacting consumer inclination towards digital ads by far” said Vikas Katoch, Founder and CEO, Adomantra.

Disclaimer: The contents herein is specifically prepared by ‘Dalal Street Investment Journal’, and is for your information & personal consumption only. India Infoline Limited or Dalal Street Investment Journal do not guarantee the accuracy, correctness, completeness or reliability of information contained herein and shall not be held responsible.



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