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| November 11, 2016 |
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Impact 
Property prices are expected to correct by 20-30%, say realty experts quoted in media reports after the Government cracked the whip on black money. Due to the demonetisation of Rs 500 and Rs 1000 notes, a 30% drop in land and property prices is anticipated over the next one year. The primary reasoning is: cash transactions will come down, as most individuals will now prefer to pay in cheque.
But would property prices indeed come down?
Well to find out, read on…
The difference between the ready reckoner and market value of property ranges 10% to 40%. If you buy a property, the builder usually takes the amount as specified in the ready reckoner in cheque and the balance in cash. It is assumed that this practice will stop, as homebuyers will now prefer to pay cheque as against cash.
This will affect demand, hence sales will fall further, leading to a correction in prices. It’s also perceived that the cost of construction would decrease, as builders earlier had to pay money under the table to get approvals.
However in time to come, with issuance of new high denomination bank notes of Rs 500, Rs 2,000 (and even Rs 1,000 in a few months, as said by Economic Affairs Secretary, Mr Shaktikanta Das) – a new gateway to black money will be opened and the practice adopted by builders will continue. Given this, in our view property prices might not substantially reduce to what many expect.
It is noteworthy that although sales in the real estate sector have been muted, prices haven’t moved down while the inventory has piled up. According to Liases Foras, there are around 1 million unsold units in eight cities including Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai Metropolitan Region (MMR), National Capital Region (NCR), and Pune. And it’s expected that it will take another four years to sell this inventory.
Builders will be unwilling to offload the inventory at steep discounts, as they’re very-well aware that while there’s short-term pain, the practice of cash transactions will once again prevail with new high denomination bank notes, and black money would continue.
PersonalFN believes, you should assess your risk appetite before committing your hard-earned money. Those with low risk appetite may refrain from investing in plots.
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Impact
Prime Minister, Mr Narendra Modi supposedly carried out a surgical strike on black money. In a 40-minute address on the eve of November 8, 2016, Mr Modi said Rs 500 and Rs 1,000 notes "will not be legal tender from midnight tonight"
People ran helter-skelter when this news broke out. ATMs witnessed serpentine queues across many parts of the nation -- as everyone wondered how they would transact the next day. There was a concern that ATMs may run out of cash as a result of this, because banks and Government treasuries were asked to remain shut the very next day i.e. November 9, 2016, plus the ATMs on the said date and the day after i.e. November 10, 2016. Hoarders of black money experienced their blood-pressure going up, being worried!
The objective of this ban is:
To know how the ban on Old Rs 500 and Rs 1,000 notes will impact you and Personal FN's views, please click here.
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Impact
Over the years, the capital market regulator – the Securities and Exchange Board of India (SEBI)has taken a variety of measures , and even revised some, in the interest of investors. For example in 2007, the regulator made grading of IPOs mandatory. But in 2013 made it voluntary; realising that it wasn't serving the intended purpose for both, retail and institutional investors.
This time too, vide a circular to all Credit Rating Agencies (CRAs) the regulator has ensured that greater transparency is instilled in the policies of CRAs to enhance the standards.
"The CRAs shall at all times observe high standards and fairness in conduct of the business and any act of omission or commission in contravention of the provisions of clauses 12 and/or 23 of Code of Conduct, as specified under Third Schedule of the SEBI (Credit Rating Agencies) Regulations, 1999, in letter or spirit, may result in violation of the provisions of section 12A of the Securities and Exchange Board of India Act,1992 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.", the circular stated.
The objective is, to protect your interest, the investor, whereby understanding ratings are made easy, plus promotes development along with regulations of the securities market.
To read more about this story and Personal FN's views over it, please click here.
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Impact
It is commonly known that many health problems are related to stress. Research has shown that stress seems to worsen or increase the risk of conditions like obesity, heart disease, Alzheimer's, diabetes, depression, gastrointestinal problems, and asthma. There can be several underlying factors that increase your level of stress, but stress due to inadequate money management is a leading cause worldwide. Surprised? Let's take look at some statistics below —
- 75%-90% of all illness and disease is stress-related, according to the Centres for Disease Control and Prevention, a public health institute in the United States (US)
- 46% of the workforce in India suffer from some form of stress, according to a 2016 study by Optum, a health services and innovation company
- 29% of individuals globally, cite that financial problems are the major cause of stress– and it is highest between the age group of 30-60 years, according to market research firm Gesellschaft für Konsumforschung (GfK SE), Germany's largest market research institute and fourth largest market research organisation in the world
Clearly, financial stress can damage your health. A US based workplace wellness firm, Financial Finesse, conducts an annual survey to understand the leading reasons of financial stress and its impact on an employee's wellbeing. The research is restricted to US employees, but much of the findings will relate to individuals in India as well.
The 2016 survey of Financial Finesse finds that those with no financial stress "have very strong cash management scores (9.1), as well as high scores in debt management (7.7) and solid retirement planning scores (6.6)." Thus, as expected, those with overwhelming financial stress score the least in these 3 areas, with scores of 2.1 for cash and debt management, and 2.7 for retirement planning
To know the 4 major causes of financial stress and how to deal with it, click here. |
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As an aftermath of the ban on old Rs 500 and Rs 1,000 notes, in many parts of the country, people flocked to money-changers to convert the illicit wealth held in old high denomination bank notes. Money-changers, taking advantage of the situation made hay when the sun shines – earning hefty commissions or margins in the bargain. So, if you were to exchange say Rs 1,000 bank note, you would not receive the change in full as some money-changers kept a margin in play to convert black money as legal tender. The rate to do had gone as high as 50%.
Gold merchants and jewellers too made merry, as many flocked to them to convert their black money held in old high denomination bank notes. Gold was a sold at a premium of 15-20% as against the actual rate.
Such has been the repercussion on ban on old high denomination bank notes. We got to wait and watch, what's in store in days ahead.
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Demonetization: Demonetization is the act of stripping a currency unit of its status as legal tender. Demonetization is necessary whenever there is a change of national currency. The old unit of currency must be retired and replaced with a new currency unit.
(Source: Investopedia)
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Quote: "Money never made a man happy yet, nor will it. The more a man has, the more he wants. Instead of filling a vacuum, it makes one."- Benjamin Franklin
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