Demonetisation Hits Real Estate; Sales, Inquiries Dip

25-year-old Ram Naresh came to Mumbai 10 years ago and has been a construction worker ever since. But the last one month has been a trying one for Ram and his family. Since demonisation, the daily wage labourer's income has dropped to a third of what he was earning before.

"We need at least Rs 6,000 per month to survive but ever since demonetisation, we barely got Rs 2,000-2,500 this month. What will we eat?" asked Ram Naresh. (Watch)

Most of the labourers at Ram's site work for daily wages. With no permanent address listed under their names and since they don't hold bank accounts, they can accept payments only in cash. This has rendered them helpless. Their employers are also facing retention issues. With daily withdrawal limits falling short, paying wages has become nearly impossible.

"Initially, soon after demonetisation, we stood in the bank queue and deposited our money but then we couldn't withdraw enough cash from the bank to pay for buying our materials. We are not being able to pay our labourers also, so they might just leave my work and go," said labour contractor Kamlapati Mishra.

But the problem doesn't end there. Since the note ban, the real estate sector has seen a substantial dip in the number of sales. Queries about projects and walk-ins have dropped by 50 per cent. Buying decisions have also been put on hold in these times of uncertainty.

"Ever since demonetisation, even the inquiries about projects that we used to receive have stopped. We understand that most customers are busy worrying about running their homes at the moment, but hopefully the situation will improve," said developer Suryakant Upadhyay.

But experts believe that after the initial setback, the real estate sector will bounce back with greater transparency and bigger investments.

"The immediate trend...in 3-6 months we will see a slowdown in sales and some price pressure in some pockets or segments. But after that what we strongly believe is that with demonetisation, the real estate residential segment mainly, will evolve in a different manner, said Dr Samantak Das, chief economist and national director of research at Knight Frank India.

"It will be much more transparent and we will definitely see a lot of institutional participation in terms of funds. Because of more transparency, the institutions will have more confidence in this sector," he added.

While developers and construction firms can survive on optimism in the near future, it's the workforce of labourers, who live from one day's wage to the next, who have been worst affected.