Impact of Rs 2000 Ban By RBI And Its Impact on Real Estate

Impact of Rs 2000 Ban By RBI And Its Impact on Real Estate

The Reserve Bank of India (RBI) has recently taken the decision to withdraw ₹2,000 notes from circulation, a move that has created waves across different sectors of the Indian economy. Among these sectors, the real estate industry has found itself under scrutiny. However, contrary to what some may anticipate, industry stakeholders suggest that this monetary policy change will have minimal impact on the real estate sector.

The Transition

The RBI's move has been met with understanding and acceptance from industry stakeholders. They believe that the impact on micro and small scale industries will be negligible, as the apex bank has given a wide window, until September 30, for depositing the notes to get them exchanged. 

However, the withdrawal of these high denomination notes could pose some practical problems in case of large volume transactions related to employee salaries and payments to suppliers, as these transactions are substantially done in ₹2,000 notes. Nonetheless, stakeholders have expressed confidence in navigating these challenges given that these notes continue to be valid as legal tender.

Understanding the Impact

KASSIA (Karnataka Small Scale Industries Association) has been vocal about the minimal disruption expected from this policy change. It echoes the views of experts stating that the economy will be least impacted as the volume of ₹2,000 notes in circulation is relatively lower and a very large part of the cash in the system is unaffected by this move.

It is also important to note that in recent times, banks have already been limiting the issuance of ₹2,000 notes, thereby reducing their volume in circulation. This has led to these notes being limited only to non-banking channels. 

Thus, the apex bank’s decision was targeted at absorbing these remaining notes in circulation from the system and probably reducing the unaccounted money in the hands of the people.

KASSIA also cautioned the industry fraternity and small entrepreneurs not to confuse this withdrawal with demonetisation, stating that while the latter had temporarily affected the economy, the latest move is more akin to a clean-up of unaccounted money in the system.

The Real Estate Perspective

From a real estate perspective, agents have expressed that the impact of withdrawing the currency will not affect their business operations. So far, the decision by the government has not had any impact on their operations. Since most money transactions now take place online, major real estate agents have no worries.

However, certain micro, small, and medium firms that prefer cash-based transactions may still be affected. The only way forward, as suggested by industry stakeholders, is to move towards non-cash transactions.

The ban may not impact the bigger players in the industry. However, small traders who buy their raw materials or pay for their other purchases could be affected. Despite this, he felt that the ban was a good move as it comes with a time frame for exchanging such notes.

In conclusion, while the RBI's decision to withdraw ₹2,000 notes from circulation may present some challenges, the overall impact on the real estate industry is expected to be minimal. This policy change represents an opportunity for businesses to embrace digital transactions and move towards a more transparent and accountable system.

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