AAP got a great idea to fight against black money/corruption in Real Estate

avi

avi

Skilled
Buying a house may soon become costlier in Delhi as the Arvind Kejriwal-led Aam Aadmi Party (AAP) government here is contemplating an increase in circle rates for flats of group housing societies and DDA by around 100 per cent.
The revenue department of the Delhi’s government has prepared a proposal which also favours to increase circle rate on agriculture land and farmhouses by up to 100 per cent and 150 per cent respectively.
At present, flats do not come under categorisation (from A to H for houses) prescribed by municipal corporations for tax collection due to which they have a uniform circle rate of Rs 58,000 per square metre, according to officials.
The department has sent the proposal to the government for its approval.
“As per proposal if approved, an owner of a flat will have to pay more stamp duty as per the current categorisation of areas from A to H.
“For instance, a person wanting to buy a flat in south Delhi will have to pay more stamp duty to get his property registered in comparison to another person buying flats in Alipur area of north-west Delhi,” a senior government official said.

http://www.financialexpress.com/art...i-by-100-buying-home-may-get-expensive/85282/
 
Tell me again what is this 'black money' people like to talk about these days.

if it goes into somebody else pocket its bad but if it goes into your pocket instead of the govt then is it still bad ?
 
This will further help is crashing the already crashed real estate market in Delhi, though doing this will boost sales in the neighbouring NCR area which doesn't come under Delhi.
 
didn't read the full article but from the excerpt, it looks like it's not explained well.

i read a long time ago that the circle rates are way less, with respect to the prices at which houses/plots being sold in those areas. this means, real estate in south delhi may officially be rated at Rs 10,000/sqft, when the actual selling price would be close to Rs 50,000/sqft. so, if i buy a 200 sqft plot, i'll be given papers for Rs 20 L by property dealer. i'd be paying him Rs 20L check against which i am supposed to pay the registration charges to govt. and rest of the payment would be in black/cash.

if the circle rates are updated according to the actual market prices of the area, there'll be very less margin for dealing in black money. this malpractice happens in NCR too and maybe all over india.

they are targeting group housing flats this time around. maybe they've done something for the plots... i am not up-to-date.
 
It does make sense - Would curb malpractices to a certain degree
Having said that, Pune is an example at the other extreme where circle rates are at least equal if not more than market rates - People find other creative ways of leveraging untaxed cash component
 
Switch said:
This will further help is crashing the already crashed real estate market in Delhi, though doing this will boost sales in the neighbouring NCR area which doesn't come under Delhi.
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Since they don't get their cut they decided they would make sure nobody else get theirs either. That's what i'm reading here.

AAP are a bunch of beggars. Reminds me of the nonsense of the 80s & 90s. Because of them the present administration is on the defensive. bringing in ever more stringent regulations.

For what ?
 
Criminal said:
didn't read the full article but from the excerpt, it looks like it's not explained well.

i read a long time ago that the circle rates are way less, with respect to the prices at which houses/plots being sold in those areas. this means, real estate in south delhi may officially be rated at Rs 10,000/sqft, when the actual selling price would be close to Rs 50,000/sqft. so, if i buy a 200 sqft plot, i'll be given papers for Rs 20 L by property dealer. i'd be paying him Rs 20L check against which i am supposed to pay the registration charges to govt. and rest of the payment would be in black/cash.

if the circle rates are updated according to the actual market prices of the area, there'll be very less margin for dealing in black money. this malpractice happens in NCR too and maybe all over india.

they are targeting group housing flats this time around. maybe they've done something for the plots... i am not up-to-date.
Click to expand...

The problem with that logic is that increase in govt valuation of property would trigger an artificial increase in market prices as well. Happened in various districts of AP and Telangana (when it was a united state) when the govt valuation of land was increased. So it doesn't really do anything about the black money if that is the intent.
 
Lord Nemesis said:
So it doesn't really do anything about the black money if that is the intent.
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yes, property prices would definitely increase but there'll be less black money involved. it can't be brought down to zero. one of my relatives bought a property close to 1Cr. he paid 57L in black: (1) because the other party demanded it and (2) according to circle rates, the property was worth 30L only. that relative faced a lot of trouble in getting loan because property papers were worth 30L but he needed a lot money to satisfy the other party.

he might've had to shell out little more than 1Cr (1.15Cr maybe) had the new circle rates been implemented. other party would still have demanded black money but not in the range of 50L. otherwise, no one would buy the same property for 1.70Cr. well, i don't follow politics; i am just stating my view point as a mango man. :p
 
^^ If a piece of land was valued at 20L when its market value is 50L, a change to 40L in govt valuation would jack up the market price to maybe 70 or 80L. The govt may get its fees based on the 40L valuation (which is good), but the black money involved would still likely remain the same. Sorry, I don't see such measures would have any impact on black money. Its simply helps to get more fees.

On the other hand, banks refusing loans does not have anything to do with this. They should and will refuse loans where things are amiss. When I got a home loan, they verified all my direct payments. The loan would be according to the value in the agreement of sale and all my direct payments to the builder would have to be through my bank account. Direct cash payments are simply not allowed. If the value is greater than 50L, either the bank or the buyer has to deduct a 1% TDS on the payment amount for which both the seller and buyer PAN numbers are required.

If anybody manages to get loans while paying a part in black money, that itself is a big hole right there.
 
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^^ i mentioned the loan issue to highlight the fact that with the prevalent property prices, shelling out 1Cr is still possible for today's middle class person. if the rates get doubled, who is going to buy any property? i don't think ambanis will be interested in buying 100 plots of 200sqft scattered across the city.

you mentioned the loan scenario. how will any random person be able to procure loan and buy property if the dealers won't lower their demand for black money? people will stop buying land.

though, buying land will still be in reach for the super rich. but then they won't be buying it for the purpose of investment. who's going to buy from them at even higher prices in the future?
 
^^ What I am saying is that getting loan has nothing to do with amount of black money. Your chances of getting loans with irregularities like this is slim regardless of the cost. Do you think you can even get a loan of 40L or 30L when the sales deed says that the cost of land is 20L.
 
^^ okay, loan thing is out. suppose no middle class person is able to procure huge loans after both govt and the dealers jack up their rates. what's going to happen next?

don't say people will start investing in gold :p though, that's what going to happen.
 
back on the loan part: there's a good piece of land near my house. asking price is 80L and the govt notified price is 30L. i have 50L in my pocket and i can easily get a loan for 30L. everything's good.

before i could make my move, govt decides to correct the land prices. that 30L land is worth 50L now. still okay because i can get a loan of at least 40L. but the dealer wants 60L extra now. there's no way i can arrange 20L more. i'll walk away from the deal until the property dealer decides to reduce his share by 20L. earlier, the black money involved was 50L and after govt's move, it's 40L.

govt won't reduce their prices. banks won't give extra loan. dealers won't reduce their cut... someone will have to relent if a deal needs to be made.
 
Criminal said:
back on the loan part: there's a good piece of land near my house. asking price is 80L and the govt notified price is 30L. i have 50L in my pocket and i can easily get a loan for 30L. everything's good.

before i could make my move, govt decides to correct the land prices. that 30L land is worth 50L now. still okay because i can get a loan of at least 40L. but the dealer wants 60L extra now. there's no way i can arrange 20L more. i'll walk away from the deal until the property dealer decides to reduce his share by 20L. earlier, the black money involved was 50L and after govt's move, it's 40L.

govt won't reduce their prices. banks won't give extra loan. dealers won't reduce their cut... someone will have to relent if a deal needs to be made.
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Hiking the registration value will not reduce black money, instead end buyer will pay the extra price. This will be earth shattering & not a ground breaking idea for middle class buyers.

If every individual collectively decides not to pay anything in black; probably black money will reduce. If no buyer is willing to pay in black, the builders have to concede. Real estate is the front runner of black money economy. Political parties thrive on it. It's not as simple as AAP thinks it is.
 
Criminal said:
back on the loan part: there's a good piece of land near my house. asking price is 80L and the govt notified price is 30L. i have 50L in my pocket and i can easily get a loan for 30L. everything's good.

before i could make my move, govt decides to correct the land prices. that 30L land is worth 50L now. still okay because i can get a loan of at least 40L. but the dealer wants 60L extra now. there's no way i can arrange 20L more. i'll walk away from the deal until the property dealer decides to reduce his share by 20L. earlier, the black money involved was 50L and after govt's move, it's 40L.

govt won't reduce their prices. banks won't give extra loan. dealers won't reduce their cut... someone will have to relent if a deal needs to be made.
Click to expand...

The solution to black money in real estate is quite simple, don't pay or take black money. That is my policy. I refuse to buy property if the seller asks for black money and I refuse to sell for black money. Do you know that there is a high likelihood of people being swindled where there is black money involved.

There are also things a govt can do to put black money completely out of the circulation loop and make it not even worth the paper its printed on. But more than politicians, people won't like it at all, People want black money to be around. That is why nothing practical is ever done. You piss of the people and you can forget about getting re elected.

IT dept revised ITR forms to take in back account details and look how many people protested against it. While the way the IT dept went about it is kind of stupid, but regardless of how people mask it, the primary reason for people not liking it is that people don't declare their interest income or pay tax on it and this move would force them to.

The biggest hurdle to stopping corruption in this country is that people want it to be around. If I stand in elections and proclaim that I will take the corrupt politicians to task and get back black money from swiss accounts, People would cheer for me and may even vote me into power. If I tell them that I would take every one of them "common people" to task and make sure that they pay their taxes, not take bribes and what not, no one will vote for me. People want others to be taken to task, but if it ever comes to their own neck, nobody would like it.

Parties like AAP and even BJP thrive on this "we will get back the black money from swiss accounts" or "we will expose the corrupt politicians" gimmickry. Majority of the black money is within the country among the so called "Aam junta". This is all just hypocrisy.
 
Lord Nemesis said:
The problem with that logic is that increase in govt valuation of property would trigger an artificial increase in market prices as well. Happened in various districts of AP and Telangana (when it was a united state) when the govt valuation of land was increased. So it doesn't really do anything about the black money if that is the intent.
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Agree, it also raises the price of the govt to acquire land as they now admit that the land is worth more than they deemed it to be earlier. I cannot imagine a better reason for the disparity between circle rate and market rate to exist in the first place and to have persisted as long.

This is nothing but politics and name & fame. They said they wanted to do something about 'corruption' so they do things that will justify that claim, whatever side effects be damned.

know what, i'm glad these lunatics are contained to just Delhi. My sympathies to the residents who are guinea pigs of 'alternative politics' !!
 
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