For a lot of people, the most tantalising long-term impact of demonetisation is the potential effect on real-estate prices. In the conventional way of thinking about the economy, a sharp fall in real estate prices would be a negative impact of demonetisation. For Indians who can't afford a house, such a fall would be the biggest possible bonanza. I don't think there is an official view on this, but in his first speech announcing demonetisation, Narendra Modi counted ordinary people's inability to buy a house as one of the ill-effects of widespread black money.

And so it is. Real estate is the dominant form of investing black money and the resilience of house prices in the face of a long-term stagnation in demand is one of the results. However, demonetisation and it's coming follow-up--a crackdown on benami property--are very likely to be what finally breaks housing prices and make housing affordable for a large number of people. The questions that most people are asking is--when will the fall in housing happen and how far will prices fall.

I'll come to the question of when some other time but as to how much, there's an interesting way to estimate this. Normally, the correct price for anything is determined by whatever buyers and sellers agree to transact at, but in a stagnant and dysfunctional market, that means nothing. However, there's an easy way to estimate demand--real demand from people who want to live in the houses--and that is the rental market. Here's a rule of thumb to follow--when the dust settles on all this, most housing will be worth 20 to 30 times today's annual rental.

Houses that are easy to put on rent will be worth closer to 30 years' rent and those where tenants are hard to find today will be closer to 20 years' rent. Go ahead and make some mental calculations. Did you come up with results you can't believe? Well, wait and watch. It's going to happen.