Anticipated impact of demonetisation on rental real estate market

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The government's recent demonetisation move has kicked up a storm in India and the debate about its gains and fallouts continues among experts and the masses alike.

There is a growing sentiment that the real estate sector will be hit hard due to demonetisation. However, more mature audiences feel that demonetization will be beneficial in the long run for most industries including real estate. Rental real estate market is an evolving segment in the real estate industry, which has witnessed increased growth in recent times. So, let us analyse how this segment will fare in the backdrop of the seemingly ominous clouds looming over the realty sector.

Price stability to increase the availability of rental homes

Earlier, black money was used extensively in property transactions, especially in the secondary market. The general scenario was characterized by increased demand and high price appreciation, something that incentivised property investors to focus on buying-selling rather than renting out properties. Now, after demonetisation, if the black money is successfully eliminated, it is expected that property prices will stabilise and price appreciation would be limited and organic. In such a scenario, renting would become equally profitable if not more than buying-selling, which would motivate owners to rent out their extra properties. This would increase the supply of rental properties.

Increased demand will attract more investments

Demonetisation is like the string of a bow pulled back. If it is successfully implemented and targeted goals are achieved, it will usher in a new era of economic growth, even though there may be problems in the short term. The demand for fully furnished rental properties is already high, and as the economy grows and creates new jobs, the demand is expected to rise. This is likely to attract more investments for developing properties meant solely for rentals.

Technology to fuel growth

Despite cash problems galore, demonetisation is allowing people to experience the ease and safety of digital transactions. Moreover, the government's ongoing focus on digitising the nation will act as a catalyst, fuelling the rapid growth of the rental housing market and making it much more organised. In the near future, the tremendous potential in the rental market will be unlocked through innovative, synergistic combinations involving various services and technology tools such as mobile apps, digital currency, online documentation, analytics, etc. It will make rental markets more organised and a hassle-free affair for both homeowners and tenants. Rental yields will also improve for homeowners.

Standardisation of rental prices

As cash transactions reduce due to digitisation, it will bring about increased transparency in the rental housing market. This would lead to standardisation of rental prices, which would be beneficial for tenants and may increase demand for rental homes.

Improved services

To ensure quality services amidst the rising demand for rental properties, property management service providers will have to adopt a professional approach and utilise tech-enabled platforms. This will help them improve their services, which in turn will benefit tenants. It will also bring about greater transparency in their transactions with tenants and homeowners.

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