Mumbai: Land and property prices, particularly those of luxury homes, are likely to come down in the short to medium term as a result of the government’s bold move to crack down on black money by scrapping Rs500 and Rs1,000 currency notes, said property advisors and company officials.

In a surprise move, the Union government on Tuesday, announced that from midnight, Rs1000 and Rs500 currency notes would no longer be legal tender.

“Land transactions and luxury residential segment would be impacted the most because they employ the maximum black money. In the short term, land prices and prices of luxury homes will see a correction of around 20-30%," said Pankaj Kapoor, managing director, Liases Foras, a property advisory firm.

In a TV interview, Deepak Parekh, chairman, HDFC, also said real estate prices would come down in the short to medium term as land would become cheaper.

“Land transactions are mostly done in cash. This will put an end to it. I expect real estate prices to come down. People would not be able to take cash. They have to declare it. They have to pay tax on it," Parekh said.

Also Read: Rs500, Rs1000 notes scrapped to combat black money: Narendra Modi

However, a few developers are not convinced that real estate would be impacted significantly though it would help reduce corruption in the long run.

“The primary real estate market would not be impacted as it is already regulated to an extent. Even land transactions in cash has significantly reduced in the last few years," said Getamber Anand, president, Confederation of Real Estate Developers’ Association of India (Credai).

On a long-term basis, real estate developers said the government’s decision to curb black money would reduce corruption and bring transparency into the sector.

“The impact of this will be huge in many markets where payment of cash is mandatory and the major form of profit-taking. These markets will see a major crash making an already difficult situation even more challenging," said Rohit Gera, managing director of Gera Developments.

“In addition to eliminating black money this will definitely bring down corruption at least for a while. In the medium to long-term the policy that emerges will determine how much corruption will return in due course," he said.

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