Can black money be controlled by increasing property circle/area rates ? Please discuss.
One suggestion to control black money is by reducing the investment opportunities for black money in real estate sector. This can be easily achieved by increasing the circle/area rates to match the market prices. It will also help in piercing this property bubble (unrealistic property rates across India).
In India, property transactions involve Huge Exchange of black money, because declared value (mostly based on circle rates) of property is always very low compared to the market price (or the actual transaction price). Only solution is to increase the Circle/Area Rates which in turn will generate increased stamp duty for the government. These circle/area rates should be REVIEWED QUARTERLY to align with the latest market prices. Other advantages of this are,
- Lesser money to dealers in property transactions
- Property prices will decrease
- More property tax due to increased property value
- NRIs/PIOs having only white money will be able to invest in real estate
- Salaried people earning only white money will be able to invest in real estate which is at present mostly beyond their reach
In Delhi, circle rates are around 25% to 60% of the market value. Hence majority transactions (more than 90%) involve exchange of cash for the amount exceeding declared value. Another reason is to save on property tax. This makes real estate an investment heaven for people having ample black money. Simplest way to curb this is by increasing the circle rates reasonably. Government should at least take basic and easy steps to stop circulation of black money, especially investment opportunities.
Also note that increase in circle rates will result in property prices coming down in the long-run. This is because overall demand decreases due to increase in white money value (due to high circle rate). So this step of increasing circle rates will have positive impact in terms of economy growth and reduction in black money. more
In India, property transactions involve Huge Exchange of black money, because declared value (mostly based on circle rates) of property is always very low compared to the market price (or the actual transaction price). Only solution is to increase the Circle/Area Rates which in turn will generate increased stamp duty for the government. These circle/area rates should be REVIEWED QUARTERLY to align with the latest market prices. Other advantages of this are,
- Lesser money to dealers in property transactions
- Property prices will decrease
- More property tax due to increased property value
- NRIs/PIOs having only white money will be able to invest in real estate
- Salaried people earning only white money will be able to invest in real estate which is at present mostly beyond their reach
In Delhi, circle rates are around 25% to 60% of the market value. Hence majority transactions (more than 90%) involve exchange of cash for the amount exceeding declared value. Another reason is to save on property tax. This makes real estate an investment heaven for people having ample black money. Simplest way to curb this is by increasing the circle rates reasonably. Government should at least take basic and easy steps to stop circulation of black money, especially investment opportunities.
Also note that increase in circle rates will result in property prices coming down in the long-run. This is because overall demand decreases due to increase in white money value (due to high circle rate). So this step of increasing circle rates will have positive impact in terms of economy growth and reduction in black money. more
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In most of the developed nations, similar pattern is followed. But India is the most populated country and property transaction numbers are quite high. A proper system will take decades to be established. But for now, ALL State Governments should, 1. Increase the Circle / Area rates (for real estate sector) to match the prevailing market prices. 2. Decrease the Stamp Duty rates to below 5%. 3. Implement a Computer-Driven system, to keep track of ALL transactions (especially small transactions) in real estate sector. 4. This should be complimented by a Decision Support System (DSS) for ease of governance by state administration and state leadership. These are the findings of the White Paper release by Finance Ministry of India (on Black Money in India) in May 2012. Please read the PDF @ http://www.finmin.nic.in/reports/WhitePaper_BackMoney2012.pdf more
Feb 18
Before selling a property the seller should inform the Government that he is going to sell the property at Rs______. The Government should have a special branch for this purpose with honest officers. These officers can send different people to the property dealers who is making a deal to know the rates of such a property and by negotiations one can really judge the actual price of the property. The Government can ask people who wish to buy property and get their offers for different kinds of property and the office can keep a list of such offers and if the property in question is seen to be undervalued for tax purposes then some persons from the above list can be asked to offer and if it is much higher than the price given by the seller then the government can take advance from the highest bidder and ask the seller to take 10% above the price he was going to sell the property. In this way no body would try to sell his property at a rate lower than the actual deal. I am living in Canada and here there is nothing such deal where the actual price is different than the shown in the deal. In this way the no black money will be involved in the purchase of property and the government will get tax on actual deal price. Otherwise the seller evade capital gain tax and the buyer gives black money he evaded income tax. The property dealer also evade tax on his income. more
Feb 18
It was the work of Congress, but nothing implemented even though they knew the whole thing. Again proves how vulnerable this system of ours is. more
Feb 18
We must congratulate the people who wrote this report. Not only property, there are so many steps written in this. I hope the new Govt. will take it as base for making our country better more
Feb 18
To support these conclusions, please refer to the White Paper release (on Black Money) by Finance Ministry of India in May 2012. Info @ below page, http://www.finmin.nic.in/reports/WhitePaper_BackMoney2012.pdf more
Feb 17
