Govt Bans Rs 500 and Rs 1,000 Notes; Move Will Cure Realty Of Many Ailments In Long Term

Little did I know I would soon be soon cured of my illness as soon as the Prime Minister drops the demonetisation word, when I informed my office I was unwell and not coming to office on November 8. However, when a sudden volley of questions and conjectures from my friends on social media platforms, especially the ones with a slightly rebellious disposition, drew my attention, I knew something big had happened. A few scrolls on my Facebook and Twitter walls were enough to educate me that Prime Minister Narendra Modi had announced on national television that the currency notes of Rs 500 and Rs 1,000 denominations were going to be discontinued, a move aimed at unearthing black money. These would cease to be "legal tender" in just a few hours from the time of announcement and become just “worthless pieces of paper”.

In his rare unannounced address to the nation late-on November 8 evening, the prime minister highlighted that the issue of corruption and the flow of black money into the economy were some of the most pressing issues facing the country. He expressed his intent to eliminate these issues, and explained that the demonetisation of these currency notes would go a long way in cracking down on black money.

While the Rs 500 and Rs 1,000 notes became invalid for all market transaction from the stroke of midnight on November 8, you could still use the ones you already have at some specific outlets and institutions like railway, bus and air ticket counters. You would, in any case, have to get these exchanged with new notes or those of smaller denomination within 50 days (between November 10 and December 31) .

Soon after the announcement, many people were seen standing in serpentine queues outside ATM centres to withdraw notes of lower denominations.

Modi, loved by his admirers for his radical ways of functioning, said the measures would help curb the disease of corruption and black money, which have taken deep roots into the system. “There is a need for a decisive war against the menace of corruption, black money and terrorism… Corruption, black money and terrorism are festering wounds that make the country hollow from within,” he said.

“Banks will be closed tomorrow (November 9) . It will cause some hardship to you…. Let us ignore these hardships … In (the) country's history, there comes a moment when people want to participate in nation-building and reconstruction. Very few such moments come in life,” Modi said in his address.

While notes of lower denomination – Rs 100, Rs 50, Rs 20, Rs 10, Rs 5, Rs 2 and Re 1 – and all coins would continue to be valid, Modi also announced that new notes of Rs 500 will be issued and of Rs 2,000 introduced.

Even as money hoarders began to lose their nerves and sleep over the announcement, Modi's supporters and opponents alike united to appreciate the bold move taken by him.

The short-term impact of the PM's move on resale property could be adverse, but it augurs well for the long term.

Let us simplify this for you. When you go to buy a property, the seller usually quotes the market price, which is much higher than the circle rate. While market rates are the prevalent rates for a property, the circle rate is the minimum reference rate below which a property cannot be sold. In fact, it is this rate based on which the buyer pays the stamp duty and the seller pays capital gains tax. Despite charging the market rate, your buyer would want you to state on papers that the transaction took place on the basis of the circle rate; it helps both the parties pay less in taxes to the government. However, to bridge the gap between the stated rate and the actual rate, the buyer has to use unaccounted money, commonly known as black money.

The small gains that common people like you and I make out of such transactions harm the country and the sector in ways more than we can imagine. While there is some damage that it causes the government and its revenue collection, its impact on us is even more adverse.

We, the common people, are the ones always complaining about lack of transparency into the sector. We also complain about the flow of black money in real estate, even as we ourselves facilitate deceitful dealings. We cheered the loudest when the government passed the Real Estate (Regulation & Development) Act, 2016, earlier this year. Why not do our bit to make the sector clean then? If I do not have Rs 20 lakh cash locked in my safe far away from the reach of the government to make up for the gap between the market rate and circle rate of the property I intend to buy, I might defer my purchase for a while. But this will, by and by, make the sector achieve greater transparency. It has to be noted that questions about the transparency have been behind a major reason for a slowdown that has been ailing India's real estate sector.

On the other hand, with increased liquidity, banks will be able to lend you home loans at cheaper rates. The Reserve Bank of India is also likely to slash key rates to make home loans cheaper. Buying property would, in turn, become more affordable.

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