MUMBAI: Interest rates have dropped to 5% from as high as 30% in the grey market , where a so far flourishing under-the-counter lending business has been stifled by the drive against black money through demonetisation Those who use real estate to park cash are hit as well, with no takers for the assets even at big discounts as the threat of benami properties coming under tax scrutiny looms large.Under grey market lending schemes, investors pool in money that is lent to real estate developers, small companies and people in distress at high interest rates. Most of such loans are given in cash and there are no written agreements. They can’t now lend or accept repayments in the demonetised Rs 500 and Rs 1,000 notes, which were the most widely used.“The interest rates charged were anywhere from 18% to 30% per annum depending on the size and tenure of the loan,” said an investor who is part such an arrangement. “Those who were to return money borrowed earlier are offering that in high denomination currency notes, and we ourselves are stuck with these. Due to this the interest rates have come down to minimum, about 5% per annum or even less in some cases,” the investor said. Many of these investors are set to see big losses, said experts.Since these money lending circles do not have any legal protection, they only lend to people they know well or in many cases only within a community. “Some of the business communities have such money pool for lending. They lend only to businessmen and developers within the community,” said a Mumbai-based investor in such schemes.“In most cases, the money lent is collected at one place, which is tough now given the situation as there are fears that there could be tax raids. Most of the grey market or informal money lending businesses are in big trouble,” a tax consultant said. Cash transactions have not just fallen in the lending circles but the impact is also trickling down to some of the other investments, like real estate.Investors who buy and sell property while dealing in cash are stuck with the real estate. Many of them are willing to give a discount of as much as 25% on the property price in just about a week after demonetisation. The hope is that even if they get 70% of the price in cheque, it would still be better than coming under income tax scrutiny, as the government recently threatened to go after benami properties. Experts said in most of the cases, the investors who put in money in real estate and cash loans are the same set.