Post Demonetisation

With suggestions from Surfaces Reporter for the bright & passionate entrepreneurs operating in the luxury domain connected to Architecture & Design. Others may find something useful as well!

In India, it has been a trend that items of luxury are often bought with larger portion of cash or so called ‘Spare money.’ Now with the severe cash crunch, there is a little or no amount left that can be spent on such exquisites. Secondly, the government is revising the cap on the cash dispensing regularly which is causing the sector to face a scarcity of cash. People are busy in exchanging the demonitised curreny for serving the daily needs. Luxury is aspirational and figures in one’s buying only when other needs are met. Thirdly, it has been found that many times, some manufacturers engage in unethical practices and in order to evade tax, accept cash as the mode of payment. With the demonetisation move, it is expected that this practice would result in much transparent business activities. While this is good in the long run, for the next two quarters, the sector has to bear the brunt. In the last few years, luxury in India has been growing at a compounded annual growth rate (CAGR) of about 25%. As per a report by ASSOCHAM, the market was expected to hit $18.6 billion by 2016 from the current $14.7 billion.

A significant portion of Luxury goods market is directly related to Real estate market. With the cash crunch in tow, Demonetisation move has deeply affected the market particularly the secondary real estate which is subject to heavy cash transactions and sure to take a big hit as per the experts. Prices of luxury homes is likely to fall by 25-30 per cent following demonetisation of Rs 500 and Rs 1,000 notes as transactions in this segment involved lots of cash payments, according to real estate consultant JLL. “Demonetisation has hit both primary and secondary luxury property sales,” said Shishir Baijal, Chairman and MD, Knight Frank India. “Because of the extent of cash involved in resale, it is impacted more,” he added.