If you don't have unaccounted cash, it might be difficult for you to buy a property in India. It might sound very harsh and unreasonable but it's a bitter truth. While we often talk about black money stashed in foreign banks; we must also pay attention to the quantum of unaccounted money that is in circulation within India. Land deals, property deals and purchase of gold bullion and jewellery often involve unrestrained use of black money. Recently union cabinet approved a bill which aims to deal with cases pertaining to black money hoarded in foreign countries. Moreover, the finance minister also hinted at introducing a more comprehensive Benami Transactions (Prohibition) Bill to fight against black money that exists within Indian economy. It is said that, stringent laws dealing with black money may affect India's real estate market in a substantial way. PersonalFN tells you what may change for Indian real estate market.

As reported by Business Standard, dated March 20, 2015, based on the observations made by Mumbai-based Liases Foras Real Estate Rating & Research Pvt Ltd; 30% of transactions in real estate are performed with black money. According to a KPMG report, real estate sector accounts for nearly 6% of India's USD 1.88-trillion economy.

How new law may clamp down the use of black money?

Before we discuss how the bill would help discourage use of black money; it is important to understand how benami transactions are carried out in property deals. In benami transactions, a person who is the official owner of the property is not the actual beneficiary. In other words, a person holding black money wouldn't buy property in his own name but in someone else's name yet (unofficially) enjoy all rights regarding ownership of the property. In such deals the real owner is masked. The new bill may make it possible for the Government to attach benami properties or those which are registered in the name of fictitious persons.

If the Government successfully clears the comprehensive bill dealing with benami property transactions, property prices would be affected. At present, many major cities have huge unsold inventory; despite of which property prices have not corrected significantly. This is because black money could be supporting prices. If government cracks down heavily on benamidars and attaches benami properties; real estate prices might come under severe pressure. It is also observed that, more than residential properties, pure land deals involve more use of unaccounted money.

The finance minister has also clarified that, the Government is looking at linking up real estate transactions with Addhar. This may help curbing transactions that are carried out using fake and multiple PAN numbers. Adhar would make it possible to reach out to the transactions done by an individual and monitor them meticulously.

PersonalFN is of the view that, tough laws discouraging the use of black money would bring in much needed transparency in property deals. Black money makes it possible for the buyer to get the properties registered at lower values; which significantly reduces the revenue of the Government. But more transparency might translate into more revenues for the Government.

Property prices in many real estate pockets have been so high that the genuine buyers are unable to buy their dream home. Black money dampens the dream of the Government to make housing more affordable to Indian masses. If black money is flushed out of property deals; prices may witness a much needed healthy correction. Having said this, you must also be watchful while buying a property. You shouldn't fall for fall for false promises made by builders.

Add Comments

Comments
Sajeesh.g@maruti.co.in Mar 28, 2015 Nice Article....Worth Reading.....
athavale.aavasudevan.ashok@gmail.com Oct 17, 2015 I don't think Govt's steps will be able to unearth Black Money My experience is Govt prints Notes of RS 1000,500,100 many times more than Notes of RS 50,20,10,5 I collect one note of RS 10 for each year I could get Note of RS 10 printed in 1915 after start of October 2015 while Rs 500/1000 Notes printed in 2015 were available from January 2015 Notes of RS 1000/500 help to generate black money It is easy to give money in black through these notes My suggestion is cancel all notes of Rs 1000,500,100 and issue notes of Rs 50,20,10,5,2,1 only Moreover black money is more in land/building dealings Ashok Athavale

 1