One of the understudied effects of demonetisation has been a rapid rationalisation of housing prices. Real estate cheerleaders (and that term must include those benefiting from real estate advertising) are pretending that the real estate markets are dormant. However, the on-ground truth is that whatever transactions are taking place are at a sharply reduced price. In urban Delhi, every example that I have with authentic information shows that 30-50 per cent of the pre-demonetisation price has evaporated.
Essentially, the disappearance of excess cash (and of all cash having round-tripped through a bank) means a deep dislocation in the real estate market. While cash usage will come back to some extent, its proportion will be much lower than it ever was. Add lower interest rates to the mix and middle class salary earners will find it much easier to buy houses.
Unfortunately, real estate buying decisions are really hard to make. There are far too many internal and external variables that can go wrong. Here's a simple checklist of rules to follow that will help you make the right decision. One, don't try and be a real estate investor on borrowed money, buy just one house which will actually save you rent. Two, don't stretch yourself. No matter how much you'd love a fancy house, the EMI should not be more than one third of your family income, this being the most important rule. Basically, don't buy a house of your dreams. I know that the whole thrust of real estate marketing is this 'house of your dreams' concept, but that's a really bad way to make a sensible choice. Three, which I hardly need to point out, is that completion of projects is at a premium today. This is unfortunate, but is a side-effect of the way real estate developers have been allowed to get away with utterly fraudulent behaviour. So buy something that you can live in, rather than a mere promise.
If you follow just these three simple rules, you will be all set to actually benefit from the effect that demonetisation is having on the salary-earners' ability to own a house.
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