At the site of a residential plot at Mokila on the outskirts of Hyderabad, three real estate agents and seven buyers were making complex negotiations. “Two of our agents took cash advances of Rs 80,000 and Rs 1 lakh from two buyers on November 6. The money was for paying contractors for laying roads and sewage lines, so it was not deposited in bank. Now those Rs 500 and Rs 1,000 notes are useless,” said Janardhan Reddy, a partner in the project.
“Technically, we did not receive the money so we didn’t reserve the plots to the two buyers who paid the advance to the agent,” Reddy said. “But the buyers wouldn’t take back the cash and insisted we go by the earlier agreement – 50 per cent payment in cash [out of Rs 9 lakh for a 200-sq-yard plot].”
On Thursday, the partners told the buyers they will accept cash in demonetized currency but the rate per sq foot would go up. It was a kind of extra charge for the trouble of finding ways to deposit the cash in banks. “Instead of Rs 4,500 per sq yard, the new rate for cash buyers is Rs 6,000 per sq yard. Not only did the two buyers agree, five others who had loads of cash in hand also booked plots at higher rates,” one of the partners said.
Such deals have been struck at various plots on Hyderabad’s outskirts. “Many buyers are actually grateful to pay at higher rates with cash they couldn’t have got rid of otherwise,” one agent said.
Inside Hyderabad, inquiries for houses in high-end areas have stopped but there is no change in demand for flats costing up to Rs 45 lakh. “Investors with lots of black money were willing to pay at high rates, which pushed up prices unevenly. Now, not many can or will pay in cash so the prices will come down,” said Sridhar Reddy, president of Hyderabad Realtors Association. “There is no slump as yet in the demand for middle-income-group apartments [less than Rs 45 lakh] because buyers will use loans and savings to pay by check but we expect sales to slow down a bit.”
The cash:check ratio is 10:90 for most new apartments up to Rs 45 lakh but 40:60 for resale flats and bungalows. “If the amount is huge, which is the case in resale, it [depositing in a bank] is a big problem. So resale has taken a big hit; agents have just decided to log out for a few days,” said Venkat Reddy of V R Realtors. “I think by the time the New Year rings in everyone will accept we have to deal 100 per cent by check in white only.”