DEMONETISATION (1)

Demons of Demonetization?

From the eventful evening of November 8th, 2016, the term of Demonetization has crept into our lives. Its implementation has been glorified to have created a huge inconvenience for people from all walks of life.

The regular citizen of the country struggled to get cash. Most of our precious time was spent in the queues outside Banks and ATMs. Many of the small and medium scaled establishments struggled to achieve their daily break even with their business models under question , especially those operating on wafer-thin margins.

If there is any chance to avoid cash transaction, people were ready to take it, even if it burned a hole in their pocket. More than money, Currency for once becomes sacred. People opted to buy groceries online or in large department stores that have POS machines so that they could avoid spending cash in their neighbourhood’s grocery store. With these changes in purchasing perspective, not only did the small and medium scaled businesses witnessed an unprecedented change but also are the invincible real estate players.

Real-Estate and the Parallel economy

One of the major sectors that have taken a hit is Real Estate and Construction. It is an industry where cash has been ingrained into the entire value chain from that of purchases to settlements to daily labor. Demonetization, while did hit out at the builders also have alarmed the workers, whose daily wages are usually paid by the contractor in cash. With demonetization, these payments have got indefinitely disrupted and in several cases these workers have become the subject of cash hoarding by the money launderers.

Real-Estate-Investment-Dropping

With this revolutionary change in the landscape, many mid-tier projects are either put on temporary hold or being delayed in progress to accommodate the subsequent developments. Despite the market predictions of downward trend in property prices, most of the sellers stay put, while there was a dearth of property buyers. While it may turn out to be too premature to comment on the prospects of the industry on account of this measure, one thing that is for sure is that it is going to rein in transparency into the industry gradually. Realtors after weighing in the potential risks of the circumvention and after lending an ear to the uncompromising stance of our Prime minister in chasing down the parallel economy,are having their fingers crossed. Most of them do wonder if the next googly from the government is indeed a mad chase after Benami properties.However, in such a case, we can definitely expect to see the market buckling to the imminent change.

Real Estate and construction sectors have a reputation of being a big bad world of black money, power and corruption. The sector is known not only to be volatile, but also unpredictable. It is also known to be an industry that always finds out its way despite any regulation for that it can game the system on account of its sheer market size and the interests of key stakeholders involved.However, despite all these, it shall be too premature to infer the effectiveness and influence of the act without us getting a peek into the numbers that shall start to roll out from government only by January end.

Real estate has been a corner stone for black economy for it a majority of the transactions were made in cash and thus stay unaccounted for taxation purposes.Demonetization has posed a challenge to this parallel economy with a majority of this unaccounted cash turning into worthless paper. Developers and resellers that otherwise insist homebuyers on having hard cash as a component of payments toward property purchases have turned wary and are now accepting a major chunk of payments through recognized channels. While demonetization did affect the real-estate sector in short term bringing in stagnancy with no buyers and takers, it does have some long term benefits for the industry as such.As the non-cash component size increases for the property purchases, size of home loan book can turn bigger with Banks and NBFCs. Further, banks being flush with cash, one can expect an imminent downward pressure in interest rates. This would not only allow access to affordable housing but also shall bring in transparency into the system. Builders and Realtors can eventually turn to be more responsible for the delivery of the projects for that majority of their cash flows from the lending institutions shall largely depend on the progress of construction. Further, with the buyer friendly provisions of the Real estate Regulatory Act, buyers shall be protected from delays in construction and handover.

Primary market, which involves the construction and sale of new projects, is well positioned to accommodate these regulations than the secondary market.The reason being a huge disparity between the registered prices and market prices that can dent the returns of the secondary seller of the property as he not only ends up paying higher registration fees but also have to account the gains for taxation. Developers of fresh real estate, on the other hand have a leeway to optimize their cost structures and thus better deal with taxation.

Demonetization and Rental market

There is one aspect of Secondary Markets of the Real Estate, where the brokers can find a little solace in these tough times – Rentals. Irrespective of the fluctuations in the market, people do need a safe place to stay .A majority of population still dwell in rented and leased spaces in urban areas giving way to a huge property rental market in these areas.

With demonetization, the rental market is also gradually expected to undergo a change. Earlier the deposit for renting a house, apartment or an office would require a payment of cash in advance. Similarly, most of the rent was transacted in cash. With demonetization, the mode of transfer for rent and rent deposits got altered significantly. Both the landlords and the tenants now prefer to opt for electronic modes for that at least it would ensure timely payments and collection. While one argument may sound that only the dearth of cash is propelling them to adopt electronic modes of payment for rentals and this shall turn back to normal once the regulatory uncertainties fade away. The counter argument on the other hand is that this act has atleast propelled the stakeholders to transact rent electronically, and made them well aware the benefits of cashless transfer and perils of cash handling. The cashless transfer would further assure the authenticity of transaction for both the landlords and the tenants.

Paymatrix is one such platform that reins in transparency of transactions between tenants and landlords, while offering much value and convenience to tenants and landlords. The platform facilitates timely payments and collections of rent and rent deposits while enabling one to pay rent and rent deposits on credit. Not only that, tenants by paying rent responsibly online on credit can build their credit histories. On the top of it, one gets to earn discounts and rewards on every payment. Landlords on the other hand can be assured of receiving rent on time and can effectively manage collections from multiple properties and issue rent receipts online. These kinds of platforms are bringing in much-needed transparency in the otherwise cash-dominated rental market.

Further information about the platform can be explored by visiting www.paymatrix.in

For feedback on the content, please write back to us at handfulofwonder@gmail.com

” The views expressed by the author on this website do not necessarily reflect the views of the website as such. Further Paymatrix doesn’t take any responsibility for accuracy, completeness, veracity, honesty, exactitude, factuality and politeness of comments or the content. Views expressed on the blog are entirely of the author and Paymatrix shall not take any responsibility, blame or any legal proceeding or litigation that may result from something written in or as a direct result of something written in a comment. The author of the content may or may not be appropriately compensated as the case may be for publishing their views on the website. Content presented in the articles are solely meant for education and information purposes and shall not be copied or re-represented anywhere without prior consent from the owner of the article.”
1

A New Beginning

Switch to any TV News channel, either in the economic or political spheres, one can find several commentaries concerned with the effects and impact of Demonetisation. It seems to be still the hot topic in 2017.  By the looks of it, it might still be in the coming weeks.

While there have been several arguments about the adverse effects of Demonetisation, there is definitely a silver lining around the surrounding developments, which we tend to overlook.

Demonetisation eventually stood as a propellant catalysing the digital awareness and subsequent empowerment of a large number of people throughout the country. With the onset of demonetisation of the old 500 and 1000 Rupee notes, a majority have been made to atleast embrace electronic modes of payment and cashless transactions; Merchants who otherwise were reluctant to adopt electronic modes now atleast have a POS to enable cashless transactions.

Earlier, in the last financial quarter, it was noted that the debit cards were majorly used in ATMs for Point-of-Sale-Device cash withdrawals say around 95% of the time. Now, with the limit on cash withdrawals and the shortage of currency, Point-of-Sale-Devicethese debit cards started to witness extensive usage in Point of Sale terminals. However, it is also to be noted that about 40-50% of the 750 million debit card users in the country are first time users on POS. More than 350 million of them are RuPay card holders, who are onto using their debit cards for first time to access their Jan Dhan accounts. Usage rate of Credit cards have increased manifold with them now being used for transaction tickets as low as 100 rupees. Similarly, requests for collection infrastructure, particularly POS Machines have registered an all-time hike. Most of the small and medium scaled establishments, which otherwise remained averse to adopt digital transactions, have now atleast evaluated the channel or are trying to adapt to the change as fast as they possibly can.

Not just with the cashless transactions, the topic of discussion has now extended to leading a paperless lifestyle. The earlier practice of presenting proofs for validation through hard copies of our identity documents has changed to that of a soft copy and paperless trail. Utility bills, Insurance Renewals, Tax Payments, even School and College Fee are now being paid online and soft copies of documents are being accepted as and where required for proof of identities. With technology creeping into our lives, how safe and private will the personal data be? That definitely is going to remain a concern!

The rise of a new Digital ecosystem

A few months ago, the Government of India introduced an initiative of Digital India. The agenda was to limit the paper trail, deal with corruption and to plug-in the loopholes in the system by ensuring transparency and faster decision making.

There are few digital vaults, especially sponsored by banks and depository participants, which are available over the internet and allow the users to store soft copies of various important documents such as certificates, documents and passports. Yes, one can be definitely sceptical about the security of any of the saved documents unless maintained by a reputed institution with impeccable cyber security architecture.

Paper or a physical hard copy is prone to different damages. With all the communication getting digital, it is best advised to improve our avenues for sharing, storage and access. For instance, Property Agreements often turn to be difficult to read and comprehend. That happens sometimes due to the age of the original document or any other damage due to its environment. Digitisation can be a solution in this regard making the documents accessible anytime and anywhere.

Further, digitization of documents can potentially bring with them much required transparency in property leasing and buying by creating an electronic trail and storage of requisite documentation to be eventually scrutinised anytime. Don’t believe me? Read ahead.

Few of the popular payment portals and e-vaults available, are Government initiatives and others are privately run. E-Stamp is one such Government funded Computer Application for paying  non-judicial Stamp Duty. The conventional system is eventually to be replaced by E-stamping in most of the states. Conventional modes of agreements and documentation usually involve procuring stamp papers from registrars or authorized vendors and eventually get the agreement documented and registered. This process was not only time consuming but was plagued with inefficiencies on account of significant human dependency. Stock Holding Corporation of India Limited, a government controlled custodian and depository participant overlooks the above mentioned procedure. It is the only Central Record Keeping Agency (CRA) established by the Government of India in this regard. This division is in charge of User Registration, Balance Administration, and the operations and maintenance of the application.

The e-stamp certification is an alternate to the lengthy and tiring stamping procedure. E-stamp Certificate, generated instantly from the application is tamper-proof and can be validated and tracked back.

Another key offering that emerged from the digital initiatives of the government is DigiLocker. It was launched in February 2015 to provide some virtual personal space for the storage of documents like a vault or a locker. This service is available to Indian residents and would require a user’s Aadhar or Unique Identification Number. The locker can store up to 1 GB of documents, certificates and identification proofs. The major idea behind this application in to reduce the use of physical documentation, related administrative expenses and to ensure safety and authenticity.

While the issues pertaining to sharing copies of agreements and related documentation are being addressed, E-signature and E-KYC are other areas of action. E-sign, as the name suggests, is an online signature service available in India. The user’s identity is authenticated by his/her Aadhar Card and eKYC (electronic Know Your Customer). All the user has to do is to link the above specified identifications to his/her mobile number. These documents would be used as per the user’s discretion without the need of the physical presence of the individual.

All these simple but ground-breaking ideas have seen the light of the day due to contributions of various federal and non-governmental think tanks such as CDSL and iSpirit. A new entire ecosystem has born involving a collection of APIs, usually referred to as IndiaStack.

Significant possibilities exist for the above technologies to address some of our basic problems including that of property leasing and renting. Often viewed as a herculean task, it is often viewed as painful for property owners to find the right tenant, validate his credentials and subsequently complete the documentation. Wouldn’t it be great if technology is leveraged to make this process a seamless and a convenient one ?

Paymatrix is one of the start-up working in this realms working towards building trust between tenants and landlords. Paymatrix is an online rent management application. It is a platform for both landlords and the tenants (prospective) to interact, share information and come to terms with each other’s requirements and specifications. With Paymatrix, users get to negotiate and make proper agreements online. Every activity and communication between the two parties is stored and each of them have a chance of maintaining the copies of agreements, rent receipts and any details regarding the house/apartment’s maintenance and safety deposit. Not only that, the platform also facilitates payment of huge rent deposits and rent on credit card and thus enables one to create a reliable tenant history. The platform already has thousands of tenants and landlords signed up from 6+ cities across India, with rent and rental deposits in millions of rupees transacted on the platform every month.

One can explore more about the platform by visiting www.paymatrix.in

For feedback on the content, please write back to us at handfulofwonder@gmail.com

” The views expressed by the author on this website do not necessarily reflect the views of the website as such. Further Paymatrix doesn’t take any responsibility for accuracy, completeness, veracity, honesty, exactitude, factuality and politeness of comments or the content. Views expressed on the blog are entirely of the author and Paymatrix shall not take any responsibility, blame or any legal proceeding or litigation that may result from something written in or as a direct result of something written in a comment. The author of the content may or may not be appropriately compensated as the case may be for publishing their views on the website. Content presented in the articles are solely meant for education and information purposes and shall not be copied or re-represented anywhere without prior consent from the owner of the article.”