In Andhra Pradesh, it’s catch-22 situation for realtors, buyers post-demonetisation

VIJAYAWADA: Demonetisation has left the real estate sector in a limbo, with both realtors and customers getting caught in a Catch-22 situation.   

At a time when cash shortage is ruling the roost, the realtors are finding it hard to complete the projects which are marred by the inordinate delay. On the other hand, the customers who have taken bank loans to pay the advance are a worried lot as the interest amounts are mounting.

Three days after the demonetisation of higher denomination currency, A Chandramohan Rao, who has booked a three-bedroom flat in Mangalagiri by paying `7 lakh as an advance, received a call from his builder that the apartment project would be stopped due to a cash shortage.

“He (the builder) insisted that I take back the advance amount immediately, that too in cash. Now, I have to exchange the money for which I may have to show the source of income for this huge amount. But, thanks to God, the amount I paid was withdrawn from my son’s salary account,” he explained.

The issue hints at the fact that the realty sector has been a safe haven for the investment of black money. “It is an open secret that a lot of black money is being invested in the sector,” a realtor told, requesting anonymity.
Further, with the cash shortage, builders are finding it hard to procure raw material, hire machinery and most importantly, pay the workers. The projects, especially those which are halfway through, have been hit hard by the demonetisation.

As on November 15, more than 3,000 housing projects are under construction in Amaravati including Guntur and Vijayawada cities. Of them, around 30-40 per cent projects are in the middle stage of construction. The total number of housing projects in Andhra Pradesh is pegged at around 7,000.
With the lack of loose tender, realtors are in a fix, for, neither can they go ahead with the projects nor scrap them. Hence, the fate of investors or aspiring flat owners remains uncertain.

“The government has specified the market value and registration value for the land. In most cases, only money equivalent to registration value is paid through legal routes, while the unaccounted money is paid in cash. With the demonetisation, the builder can’t run the business by paying cash and if they go for cashless transactions, they will come under the scanner of the Income Tax officials,” explained a top builder from Vijayawada.
Though the demonetisation would not have a major impact on the projects which are either in the starting phase or in the last stages of completion, the projects in the middle of the execution will be hit, he added.
Sources said that at least 20 to 25 per cent transactions are done with black money in a majority of the housing projects.

However, CREDAI Visakhapatnam Chapter chairman K Ramakrishna hopes that the demonetisation would not have any long-term impact on the sector. “The genuine realtors have their transactions through cheques as the apartments are purchased using home loans. But, those who invested in unauthorised layouts will suffer for sure,” he said, admitting that due to lack of change, they are unable to make payments to the workers.

“Though there are problems pertaining to such payments, we are managing through our contractors,” Ramakrishna added and denied knowledge of any housing project being stopped in Visakhapatnam and surrounding areas due to demonetisation.