By Sandip Sen

Linking income tax returns with Aadhaar No and PAN is a welcome step, but not enough to identify every person who is a potential taxpayer or a perennial tax evader. It is important to link all real estate acquisitions with these unique identification numbers.

The Benami properties act amendments that came into effect from 1st November 2016, days before the announcement of demonetization needs to be further reinforced and augmented with tools that facilitate auto identification of the property holder. The newly amended law prohibits the transfer of Benami property from benamidar by the real owner. It also permits seizure without compensation of the Benami property by the Government. However, there is some work that needs to be done in tightening the laws for identification of Benami properties.

You may also watch:

Each property needs to be identified with Aadhaar
For such identification, every property bought should be linked to Aadhaar numbers, to make the system foolproof. Black money in India has stashed away either in form of liquid cash or in the form of movable or immovable assets. Nearly sixty percent of the black money is pumped into immovable assets in form of both residential and commercial property, by individual or family managed trusts or closely held charitable trusts.

To ensure that such property is not bought in the name of their pet dogs and cats of India by thousands of ultra rich tax evaders, or in the name of loyal servants, fictitious unregistered trusts, each piece of property bought in the last ten years needs to be tagged with an Aadhaar number. True this will be a mammoth exercise. As per estimates over 25000 high-rise structures have been built ever since the high rise buildings act was amended in 2005, creating over two million dwelling units in the high-rise apartment sector alone that would be each costing over Rs 10 Lacs. Another 20 million transactions would have possibly happened in other residential and commercial properties. All these could be linked with the buyers Aadhaar number over the next financial year, so that every property bought becomes Aadhaar linked. If necessary new legislation should be introduced but the mechanism should, however, be simple, fair and uni-dimensional to make this massive property identification exercise easily executable.

Transparency and ease of business are equally important
Of course, their will be a shakeup in the real estate market following such legislation. Price rationalization will take place as people who invested massively in Benami property will want to disinvest in a hurry. It is, therefore, imperative that alternative avenues for investing in the real estate businesses are opened up while tightening the screws on Benami property. For years real estate agents have been buying large holdings from property developers and selling them off at a profit without payment of taxes. The builder is usually in league with the dealer syndicates who indulge in property booking. This syndicate reserves four to five lower floors at the start of the project in each building, paying the builder advances in both cash as well as through cheques.

You may also watch:

All that practice encourages black money because a lot of the early reservations are not in the form of legal ownerships, but kuccha agreements. This because it would need property tax payment for a flat to change hands from the builder to a broker to flat owners, that is usually avoided by kuccha deals. The legislation change must also have a clearly defined provision by which the property developer takes advances from property dealers as an investor without having to do kuccha deals. To create transparency you have to facilitate ease of business and models abroad exist that make property investing a legal and profitable function without resorting to kuccha deal making. It is time India takes heed of such practices and modernizes its archaic laws in real estate business.