Black money haven
granting additional FAR,” says a realtor, requesting anonymity.
According to renowned urban planner, MN Buch, “Allowing dubious construction, compounding of flouting of norms, difference in circle rate and market rate of property are some of the reasons which encourage the circulation of black money in real estate.”
The realty sector contributes nearly 10% to India’s GDP. Many experts say the black money involved in this sector could easily contribute another 10% to India’s GDP. “The 30% tax on capital gains from property compels homebuyers and investors to take the black money route. For instance, if I buy a flat from a developer for 50 lakh and the price appreciates to 70 lakh in a few years, 20 lakh is the capital gain to be taken into account when I sell this flat. I will have to pay 30% the gains I have made to the government as tax. Because of this, homebuyers often accept the sale amount as cash to avoid tax. If this can be rationalised to 10% than I think people will pay tax willingly,” says Pawan Jasuja from Finlace Consulting.
Things will improve if the real estate regulatory bill is passed i n parliament, say experts. “A regulator in this sector can take several steps to cleanse the system. Uploading
of all data relating to the sale of all types of immoveable properties on developers’ websites on a real-time basis should be made mandatory. It can also oversee the implementation of building bye-laws and acts,” says Aditya Dewan, a Supreme Court lawyer.
Developers/promoters must get the projects approved from the sector regulator who also should determine the price bracket. Anyone planning to do otherwise should seek prior approval from the sector regulator, which should permit the same only for the specified reasons, Dewan advises.
Brijesh Kumar, former secretary to the Government of India in the Department of Information Technology, who has also served as chairman and CEO, Greater Noida Industrial Development Authority, says circulation of black money is “the failure of
everybody involved in the system.” He suggests that policies be tailored to minimise the cases of unrecorded transactions. “Besides that, if the circle rate and market rate should be brought at par and stamp duty is lowered, there won’t be any incentive left for people to unnecessarily hide things. Further, I suggest more openness in approving tenders so that these instances can be curbed.”
A majority of experts are of the view that land transactions, allotment and conversion from agriculture to residential or commercial require huge black money transactions. “If land transactions can be made transparent, more than 70% to 80% black money can be stopped at that very point. The others are smaller cases of black money circulation,” says Chaman Panwar, a realtor.