Demonetization not enough to clean up real estate, says Assocham

realestateThe ongoing crack down on black money alone will not be helpful to remove black money from the real estate sector, industry union ASSOCHAM said.

Many buyers of real estate prefer to show lower costs on record simply to avoid the high levels of stamp duties payable on such transactions. In most states, Indians have to pay 7-8% of the purchase price of the property as stamp duty.

Assocham said state government must “drastically slash” the stamp duty on purchase of residential and commercial properties to eliminate the use of unaccounted cash in the transactions and “save the real estate and construction industry from being stamped as the parking lot for the dubious deals.”

The biggest beneficiary would be the buyers of the residential or commercial property.

“One of the biggest reasons for the cash forming 30-40 per cent of the real estate transactions is the high level of stamp duty. With 6-7 per cent stamp duty , purchaser of a flat worth Rs 1-1.50 crore will have to shell out different government levies and other charges like registration, lawyers’ fee to the extent of Rs 10 lakh or so. For a middle class family, which depends largely on borrowed money, this is a huge amount.

Likewise, the registration value also determines the capital gains tax for the sellers. With both these levies accounting for significant account, there is a big incentives for the buyers and sellers to show the registration amount as much lower than the real transaction value,” the chamber said.

It said there are instances where ironically, people filing their income tax returns and living a clean life are forced to withdraw from their legitimate bank accounts cash for such transactions.

“Thus, the system forces you to convert white into black and not black into white. Nobody likes it, but the state governments must come forward and slash it by at least 50 per cent and the move would rather result in increase in their revenue rather than reducing it,” ASSOCHAM Secretary General Mr D S Rawat said.

Lower stamp duty would also revive the demand in the highly suppressed sector which would further be jolted with cash totally drying out from the transactions, the chamber said.

“The cleanup will take place with lower duties, ease of doing business in terms of clear land titles by the state regulatory agencies and other clearances being made transparent. It cannot be one –way street where the builders are expected to grease the palm of the corrupt officials and others while they are then expected to do every other transactions by cheques. Hopefully with the new model law in place, things should improve,” the chamber said.

A recent joint paper by the ASSOCHAM and Thought Arbitrage did find prevalence of rampant black money or ‘untaxed money’ in the real estate business posing a great challenge for the construction industry.

For speedy approvals and sanctions from authorities, builders or contractors are often compelled to pay large sums of money as bribe to government officials, surveyors, engineers etc. A part of the burden is passed on to the ultimate buyer who in turn has to pay in cash to the contractor.

“Let us use this strong government move against black money and corruption as an opportunity to the clean up different sectors of the economy, which have been suffering on account of this menace,” the chamber said.



Mining baron Sekhar Reddy arrested after Income Tax raids Sand miner Shekar Reddy has been arrested, two weeks after the seizure of crores of rupees and gold in an income tax raid. The arrest has come hours after Income Tax officials conducted a raid on Tamil Nadu's top bureaucrat chief secretary P Rama Mohana Rao at his home.It was speculated that Rao's home was raided on the basis of information obtained from...
Demonetization: RBI removes ‘explanation’ requirement for KYC accounts The Reserve Bank of India has responded to widespread criticism of its directive to collect 'explanations' from those depositing more than Rs 5000 by clarifying that this directive will not apply to bank accounts with proper documentation."On a review of the above, we advise that the provisions of the above circular at sub para (i) and (ii) will not appl...
Demonetization: Modi announces bumper prizes; 15 lakh users to get 1,000 rupees Narendra Modi announced several 'prize schemes' to promote cashless transactions.Under the schemes announced today, there will be two sets of prizes for consumers and another for small merchants.Under the first scheme, any customer who uses any electronic form of payment, including wallets and debit cards, will qualify for a 'lucky draw' of Rs 1,000 ...
Demonetizaton: Govt places limits on last minute deposits The Reserve Bank of India said that any person who continues to hold old notes of 500 and 1000 rupees in bulk will get only one more chance to deposit them into bank accounts and will also have to provide an explanation for the delayed deposit."Tenders of SBNs in excess of ₹ 5000 into a bank account will be received for credit only once during the remain...
Demonetization: Swaraj India says political parties could become money laundering centers Swaraj India party today said the Income Tax department's decision to continue to provide immunity to political parties from having to reveal their sources could turn them into money laundering centers.According to Section 13(A) of the Income Tax Act, 1961, if you have registered a political party, you can deposit any amount of money after opening an acc...
DEMONETIZATION: Wholesale Price Inflation falls to 3.15% in November The annual rate of inflation, based on monthly WPI, stood at 3.15% for the month of November, 2016 as compared to 3.39% for the previous month and -2.04% during the corresponding month of the previous year.The fall is largely expected due to the impact of the withdrawal of high-denomination currencies during the month.Build up inflation rate in the ...
Domino’s Pizza starts cashless facility for phone orders Domino's Pizza has started cashless payment facility for those who order by phone as well."Post demonetization, we have seen many customers choosing to order online. Consumers coming to our restaurants to dine in or carry out are able to pay With Credit caras or Wassets. However, there are many customers who still order with a phone. It is for these cust...
Taxes will be made “more reasonable” in cashless India – Jaitley Taxes in India will be made more reasonable as more and more transactions switch to the cashless mode, finance minister Arun Jaitley said."As more and more transactions are made cashless, they will come under taxation.. (and with this) taxes will be made more reasonable, both direct and indirect," Jaitley said today.The finance minister was giving ou...
After pumps, Bata stores to provide cash withdrawal The story has been withdrawn by the company.
Modi says people who deposited others’ money may get to keep it all Opening a new front in the fight against black money, Prime Minister Narendra Modi today said people who were forced or tricked into depositing other people's money into their bank accounts may be allowed to keep the entire sum for themselves."Do not touch that money," Modi said, addressing a rally in UP."I am exercising my brain to come up with a pl...
Petrol Pumps, Airlines Will Not Take Old Notes From Saturday | DEMONETIZATION Old notes will no longer be accepted at petrol pumps and airline ticket counters starting from Saturday, according to sources.So far, petrol pumps and airlines had been given an exemption from demonetization of 500 and 1000 rupee notes.However, in an effort to control the widespread 'whitening' of black money, the government is gearing up to plug...
BJP asks all MPs, MLAs to submit bank statement to party As part of the ongoing crackdown on tax evasion and illicit funds, the Bharatiya Janata Party has asked all its MPs and MLAs to submit the full details of their banking transactions from Nov 8 onwards.The central leadership of the party will examine the bank statements of these representatives to check for any illegal or suspicious cash transactions....
7 ILLOGICAL REASONS to oppose DEMONETIZATION The current demonetization move by the Narendra Modi government has seen a lot of accusations and counter-accusations being levelled by both the supporters and opponents of the move.While the government has tried to deal head on with the official accusations levelled by opposition political parties, a much more subtle misinformation campaign is going o...
DEMONETIZATION: How some earned lakhs standing in queues The government has banned over-the-counter exchange of old 500- and 1000-rupee notes due to suspected gaming of the system by those with black money. According to banking industry sources, the over-the-counter exchange system was being massively misused by hawala operators and others who had illegal funds to convert their old currency into new notes."The...
Despite Demonetization, India will beat China in GDP growth: Fitch Ratings Despite a moderation in India's GDP growth rate in the short term due to cash crunch, the Indian economy will still grow faster than that of China, global ratings agency Fitch said."We still expect India’s GDP growth to trend higher than China’s in the medium term," said the agency, whose primary job is to advice bond buyers on risks involved in buying d...