Demonetisation sparks a debate over its impact on the Indian economy: Kamal Khetan

This step is one of the most forward-looking and transformational reforms undertaken by Prime Minister Modi. Targeted towards reducing the unaccounted money in the system, this step will significantly improve transparency in the sector and thereby push growth to an upward trajectory.

Nov 23, 2016 04:11 IST India Infoline News Service

Kamal Khetan, Chairman and Managing Director, Sunteck Realty Limited
The Government’s recent demonetisation of higher currency notes has sparked a debate over its impact on the Indian economy. This step is one of the most forward-looking and transformational reforms undertaken by Prime Minister Narendra Modi.

Targeted towards reducing the unaccounted money in the system, this step will significantly improve transparency in the sector and thereby push growth to an upward trajectory. It will be well supported by other recent reforms undertaken by the Government in the real estate sector like Real Estate Regulation Act (RERA), GST, REITs and reforms related to FDI.

Organized players and reputed brands are already complying with most of the requirements for these regulations and hence will not be impacted by the move. The new currency provisions along with the other regulatory reforms will instill more confidence in the minds of home buyers with regards to fair transactions and on-time execution in the sector thus leading to sustainable growth. Moreover, with greater transparency and better corporate governance, the real estate sector will see a huge inflow of foreign capital via private equity and REITs.

With higher denomination currencies contributing to almost 85% of our total $ 250 billion currency in circulation, banks are likely to see an upsurge in deposits. This increased liquidity may lead to home loan rates being reduced to 7-8% (as FD rates fall to 5-6% bracket). The government will significantly benefit from the increased tax compliance and will be better positioned to fund its infrastructure reforms like Housing for all, Smart City mission and better transportation infrastructure. Improving infrastructure, new airports, new highways, more metros – all these factors lead to increasing demand and prices of real estate in a city.
 
The author Kamal Khetan is Chairman and Managing Director of Sunteck Realty Limited.

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