While Aadhar has already become a pivot for all the financial transactions in the country, the government of India has already expressed its plans to make it mandatory to link it with property transactions as well.
This has created ripples of disruption in the real estate market in India. Until now, a lot of real estate transactions in India are executed in unknown names. Why? Because people do not want to reveal their ownership of capital intensive assets especially when the properties are bought on the basis of the income for which the sources have not been declared in the Income Tax returns.
This one move of linking Aadhar Card with property ownership is likely to reveal real estate worth several thousands of crores. In November 2016, the Benami Transactions (Prohibition) Act, 1988 was amended as Benami Transactions (Prohibition) Amendment Act, 2016 that came into effect from 1st November, 2016.
Since then, the Income Tax department has attached benami properties worth Rs 1,600 crore. The amendments in the Act have empowered the Income Tax officials to attach properties for which the ownership could not be established. This single amendment has brought about a sea change in the benami property market, sending several high-profile politicians and businessmen in a state of shock.
At the same time, the amendments have made it clear that the government of India is committed to bring more transparency in the real estate sector in India which is known for its unorganized nature and opaque ways of operations.
The government has cracked down on the parallel economy run by cash transactions in a breakthrough way. Just after making such major amendments empowering the Income Tax department to confiscate benami properties, Prime Minister Narendra Modi announced the massive demonetization of Rs 500 and Rs 1,000 notes.
Just after a few months, the government enacted the long-awaited Real Estate Regulatory Act (RERA) in May 2017. The series of events one after another simply indicate the intensive planning and strategizing to clean up the real estate sector in India – which is pegged at US$ 130 billion and is touted as the second largest employer in India after agriculture.
It is interesting to note that so far the government has not made it mandatory to link Aadhar card to property ownership. Despite that the Income Tax department has already unearthed benami properties worth Rs 1,600 crore in its inspection drives.
This number simply reveals the sheer value of benami properties that are existing under the wraps and of which the value is not been added to the economy.
There is no doubt that there is real estate worth several thousands of crores that is bought in the name of fictitious names and thus they are not been accounted for any tax treatment neither their economic contribution can be tracked nor they add any value to the country’s development plans.
Once these properties are merged to the mainstream economy, the size of the real estate sector is going to increase by several folds. This will have a cascading impact on several other factors including taxation, pricing of properties and funds for public welfare. The real owners of benami properties buy properties at any rates and pave way for speculation in pricing and demand. However, when this mode gets restricted, the actual end users will be much benefitted as the developer community will be much more forthcoming in selling their projects to real end users.