Penalty on hold­ing va­cant hous­ing stock can end spec­u­la­tion

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - HT Es­tates Cor­re­spon­dent ht­es­tates@hin­dus­tan­ ■

Over 60% of hous­ing stock pro­duced in the last five years within the Cen­tral Na­tional Cap­i­tal Re­gion is re­ported to be un­oc­cu­pied. To put off spec­u­la­tors, heavy hold­ing taxes and other penal­ties should be im­posed on own­ers of these prop­er­ties, pri­mar­ily in­vestors, to bring down de­mand in the hous­ing sec­tor and sub­se­quently prop­erty prices, sug­gests a re­port ti­tled Real Es­tate Sec­tor - Post Re­mon­eti­sa­tion and Real Es­tate Reg­u­la­tion by RICS (The Royal In­sti­tu­tion of Char­tered Sur­vey­ors, a a pro­fes­sional body that ac­cred­its pro­fes­sion­als within the land, prop­erty and con­struc­tion sec­tors world­wide.

The real es­tate sec­tor is a sig­nif­i­cant repos­i­tory of money that’s not ac­counted for in In­dia, usu­ally by way of prop­erty pur­chased in ‘be­nami’ (not un­der the owner’s name) form in cash. A key pur­pose of de­mon­eti­sa­tion was to elim­i­nate use of black money chang­ing hands dur­ing such trans­ac­tions.

As per es­ti­mates about 30% of money chang­ing hands within the real es­tate trans­ac­tions are un­ac­counted for.

Ex­perts say that there have been his­tor­i­cal rea­sons for the sec­tor to have seen high lev­els of cash trans­ac­tions, the main rea­son be­ing heavy taxes levied on both buy­ers and builders.

“A more in­sid­i­ous as­pect of the real es­tate mar­ket is the preva­lence of cash trans­ac­tions in buy­ing and sell­ing of real es­tate, of­ten un­ac­counted for at both the buyer and seller ends – and there­fore es­capes tax­a­tion li­a­bil­i­ties or scru­tiny. Al­though this prac­tice is usu­ally preva­lent in the sec­ondary mar­kets, ie where real es­tate as­sets are re-sold, there have been in­stances of some un­scrupu­lous de­vel­op­ers also de­mand- ing a cer­tain por­tion of the sale con­sid­er­a­tion in (un­ac­counted) cash,” says the re­port.

Iron­i­cally, while the pur­pose of us­ing of un­ac­counted-for cash in a real es­tate trans­ac­tion has been to avoid taxes and re­duce the ef­fec­tive cost(s) of trans­ac­tion, it has been in­stru­men­tal in driv­ing up pric­ing within the real es­tate sec­tor.

This has been so be­cause of a steady sup­ply of real es­tate as­sets that may not find ac­tual phys­i­cal use in the near fu­ture, but pro­vide suit­able av­enues for ‘park­ing’ of un­ac­counted monies. In essence, the value of such real es­tate as­sets is not de­ter­mined by their po­ten­tial for phys­i­cal use, but for their po­ten­tial to act as a ve­hi­cle to con­vert un­ac­counted money to hard as­sets. That is likely to change go­ing for­ward.

Bud­get 2017 has also re­stricted the use of cash in any trans­ac­tion equal to or above the amount of ` 3 lakh. This means that de­vel­op­ers/ sell­ers will not be able to ask for cash amounts to over and above ` 3 lakh.

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