The Role of Demonetization in Cleansing India's Real Estate

Demonetization, an unexpected move by the Indian government in November 2016, was aimed at curbing the circulation of black money in the country. This move affected various industries, and India's real estate sector was no exception. Demonetization had a significant impact on India's real estate as it helped cleanse the sector of black money and brought transparency to the transactions.

For years, black money has been a significant factor in the growth of India's real estate sector. The real estate industry had become a safe haven for individuals with unaccounted money. Developers often demanded cash payments for properties, making it an ideal way for black money holders to convert their funds into legitimate assets. The absence of a clear system to document such transactions made it difficult to trace the source of the money.

Demonetization brought about a sudden change in the real estate sector's functioning. As cash became invalid, developers could no longer take cash payments. This move made it impossible for black money holders to use their unaccounted cash in the real estate industry any longer. The use of digital payment methods, such as cheques and bank transfers, became the norm in real estate transactions, bringing more transparency to the sector.

The government's push for digital payments in real estate transactions also brought about a reduction in property prices. With cheques and bank transfers registering the payment, buyers could not claim that they had paid cash, and hence the need to inflate property prices came down. This motivated buyers to invest in legitimate properties at reasonable rates, and further resulted in the reduction of black money circulation.

Demonetization also led to the tightening of norms and regulations in the real estate sector. The Real Estate (Regulation and Development) Act, 2016, was introduced. The act brought in provisions that ensured transparency in real estate transactions, safeguarding the interests of buyers against unscrupulous developers. The law mandated that developers register their projects with the Real Estate Regulatory Authority (RERA) and disclose every detail related to the project's finances, completion date, and legal status.

In conclusion, demonetization played a crucial role in cleansing India's real estate sector. The move brought about a significant reduction in black money circulation, ensured transparency in transactions, and tightened norms and regulations in the industry. Demonetization has even led to a change in the way the sector functions, eliminating the need for cash payments and promoting digital payments. With this significant move, India's real estate industry has become more transparent and has brought about a system that benefits both buyers and developers.