Best time to buy your home : Demonetization Impact Part 1
With last week’s decisions, one impact I can see over the next 4–5 months is affordability of houses for the salaried middle class.
- Low prices:
Old properties/ Resale: Traders and business owners owns most of the real estate to safeguard their black money. They don’t deposit much of the money into banks to avoid taxes. Now most of the cash they were holding will become of no use.
To run their businesses, they won’t have money now. In order to keep their business float, they have to sell assets (read properties) and will be under pressure to sell even at a 25–30% discount. Plus as no buyer will have cash for next few months, whole transaction will have to be done in white (that means they will also come under capital gains radar).
New properties: For already starved builders, they would have no option but to decrease prices in order to generate cashflow to run businesses.
- Cheaper and easier loans — More deposits in banks would mean more availability of cash for loan disbursement (banks pay small interest on saving account, to pay that amount, they have to give that money to somebody else on loan to make profits) — Means low rates on home loans plus quick and easy processing.
- Upcoming tax rebates and saving: Most probably in the coming budget, there would be additional tax benefits for home loans and less tax payout (moving exempted slab/ lowering tax rates). Thus salaried middle class would have additional disposable money.
- Low inflation: With bank rates going down, inflation would also go down immediately thus making daily stuff cheaper and more disposable money.
If you want to buy house to make it your home, go for it. I am against buying houses for investments, so if you surplus white money, better invest into share market and mutual funds (will tell why in next article)
Disclaimer: My assumption and theory may be with flaws, please comment so that I can also learn from your knowledge. Also please ignore grammatical and syntax errors in writeup.