Rs 2,000 note withdrawal: RBI's decision puts realtors in limbo over dealing with cash

The abrupt announcement on withdrawal of the Rs 2,000 currency note by the Reserve Bank of India (RBI) has posed a unique problem for real estate developers across the country. While they are witnessing a surge in sales queries for cash purchases of residential homes and commercial properties, most are in a state of limbo on whether to grab the opportunity or to give them a pass.

According to multiple realtors that Business Today spoke to, since the RBI’s note withdrawal announcement on Friday they are witnessing a surge in sales queries from potential customers, who want to purchase properties against cash. “Over the weekend, we have received queries from over 50 potential buyers who are willing to purchase residential apartments against 70-80 per cent cash payment, out of the total price,” a senior executive from an NCR-based realtor told BT on the condition of anonymity. 

Other realtors, spread across markets like Mumbai Metro Region, Bengaluru and Kolkata, apart from the National Capital Region of Delhi (Delhi-NCR) are witnessing similar trends, they say. “While there have been a surge in such queries, majority of these (potential) buyers belong to the business community or related to political set-ups,” another realtor said..

The renewed rush for property purchases, however, has put most of these real estate players in fix over whether to go ahead with such deals or to stick to the stated practises. While measures taken by the authorities over the last few years - like the demonetisation and introduction of Real Estate (Regulation and Development) Act. (RERA) have reduced the cash transactions in property dealings, it has failed to abolish the same.

“The challenge is once a developer excepts large sums of cash in Rs 2,000 currency notes, how does it channelise the same without being flagged,” an industry insider expresses his concerns.

As per industry estimates, cash dealing in real estate transactions continue to form nearly 35 per cent of the property value in major markets, compared to nearly 45-50 per cent a decade ago. In spite of government measures, homebuyers and developers prefer to deal a part of the price of the property in cash as that helps them reduce registration fees payable against the property, where the market price is much higher than the circle rate.

Industry experts such as Vimal Nadar, Head of Research at Colliers India, however, welcomes the move. “The withdrawal of Rs 2000 rupee-denominated notes is an expected and timely move towards prudent currency management within the realm of maintaining banking & financial discipline. Such measures will further reduce the probable cash component in high-value real estate transactions," he said.

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