Bottom Line: Will the Union Budget 2017-18 touch upon the benami property, as expected?
Ever since the Prime Minister Narendra Modi announced the demonetisation, the buzz word vis-√†-vis the real estate market has been the Benami Transactions. The government has time and again reiterated its commitment to hit out at the benami properties after the demonetisation. It is hence epxected that the Union Budget 2017-18 would have some more concrete road map and suggest financial curbs on the benami transactions.
The larger question within the built environment of Indian real estate is as to what extent it will affect the business of Indian real estate. The stakeholders within the organised segment of property market do welcome the expected move on the face value, but the grey areas are too deep rooted in the system.
Moreover, the unorganised real estate in this part of the world is larger than the organised property market. With land records and transactions not digitised and up to date, it is a challenging job to assess the extent of beanmi properties in the country. The developers within the organised segment of Indian real estate nevertheless welcome the expected budget announcement to curb it.
Benami check & budget
- After demonetization, curb on benami property is next big goal of the government
- There are more benami transactions in the unorganized property markets and hence concealed from the law
- With land records & transactions not digitized benami property a challenging zone for the government
- Union Budget 2017-18 expected to give some answers as to how to curb benami transactions in property market
- There is no clarity over what is ideal fiscal deterrence to stop benami property¬†
Kaizad Hateria, Brand Custodian and Chief Customer Delight Officer, Rustomjee Group asserts that if there is any concrete step on benami property in the Union Budget the serious developers will be the first one to cheer. According to him, crackdown on benami properties can help clean up real estate sector. If the new law is implemented properly, there will be greater transparency in the real estate sector; there will be less corruption; and we may see a correction in prices.
‚ÄúAbout a third of the country’s 1.25 billion population lives in cities, with numbers rising as tens of thousands of people leave villages to seek better prospects. A government plan to provide housing for all by 2022 is meant to create 20 million new urban housing units and 30 million rural homes. Going after benami properties can help accelerate the pace of implementing the government’s plan,‚ÄĚ says Hateria.
Parth Mehta, Managing Director, Paradigm Realty also advocates that there has to be some stringent measures in the upcoming budget to check benami transactions. Benami Tool was introduced to control black money in real estate sector.
‚ÄúThe registration of property will be flawless in the name of the actual owner; also control on the maximum number of property registration would be under one name. Land inventory can also be managed,‚ÄĚ says Mehta.
Vivek Mohanani, Joint Managing Director, Ekta World believes that the realty sector has lately witnessed a series of corrective measures by the government, Benami Transaction Act being one of them aiming at making the sector more transparent and professionalized.
‚ÄúThe institutional framework of the realty sector has already been strengthened by the government by amending the Benami Transactions Act, to make the law more stringent,‚ÄĚ says Mohanani.
There is no denying that when the titles are clear and transactions are transparent, the confidence of lenders increases. The Indian real estate will be witness to a pickup in lending to buyers. This will increase the supply of residential real estate. However, it is not as easy a road map as it sounds. The government will have to come up with a well defined road map for the same.
The Union Budget may address it in terms of financial penalties for the benami transactions and the benami property holders, yet the problem is so deep rooted in the system that only a fiscal road map is not enough. With most of the land records not digitized what it needs to put a curb on benami transactions is the structural reforms in the administration than mere policy announcements of budget.
The government has made changes to strengthen some institutional framework by amending the original Benami Transactions Act 1988 to make the existing law more stringent. Under the Benami Transactions (Prohibition) Amendment Act 2016 that recently came into force on 1st November, 2016, a transaction is named ‚Äėbenami‚Äô if property is held by one person, but has been provided or paid for by another person. The Act prohibits recovery of the property held benami from benamidar by the real owner. Also, benami properties are liable for confiscation by the government.
However, the impact of such measures can only control such holding and transactions in the organized property markets. The big challenge for the government is to create a mechanism where the fiscal transaction is not possible in property market for benami property deals. Can the Union Budget 2017-18 come out with some concrete answers?
By: Ravi Sinha