The recent decision by the Modi government to demonetize Rs 500 and 1000 notes is believed to have far reaching effects. The one sector that is sure to be affected by this decision is properties and real estate, with many experts believing that while the move might hit the industry hard in the initial stages, it will definitely bring in great benefits in the long run. However, the one niche for which demonetization might prove to be a good step over the next 8-12 months is the rental market or more specifically the residential segment.
In fact, the average rental values across the country have shown a growth of 4.9% as compared to the 3.6 % average growth in the prices of houses. There is expected to be a further growth in the rental values over the next several months owing to the fact that most buyers will be in a dilemma about whether to buy a property during this time or to wait for the dust to settle down on the demonetization issue. This is because they might not be sure about how the real estate market will be affected by the move, in terms of sale and purchase of new property.
Another major reason that might cause the investors to withhold their decision of buying property is the prediction about the property prices as well as the interest rates on home loans plummeting significantly. With more prospective buyers willing to spend some more time in rental accommodations till the effects of demonetization are well established, there is likely to be an increase in the demand for such properties. This will automatically help in making the business of renting out residential properties almost as profitable as selling one and will consequently lead to a hike in the rental values.
So while demonetization might spell a slowdown for buying and selling new properties, it is likely to help in the growth of the home rental space both in terms of volume and profits. As such it is not surprising that many real estate dealers, who had earlier left this segment, are willing to re-launch the rental business in the current times. In fact, most online property portals, which have been dealing only in the core business of sale and purchase of property, are now venturing into the niche of home rentals, has further fueled the belief that rental values are likely to show and upward trend.