Modi govt's next push against benami properties may settle down the real estate sector

“Ek teer se do shikaar”. It looks like our PM will be hooking up several shikaars as the current demonetisation drive is just the beginning of anti-corruption stir and will spur on a number of measures to rid India of its corrupt image.

After this period of 50 days of punitive action against owners of black money, folks, be prepared as the next whacking axe is set to fall against ‘benami’ property owners: a warning has been issued by our PM Narendra Modi, who has said clearly in Goa, “I am not going to stop at this. I will expose the history of corruption of 70 years since Independence.”

Reuters

Who are these benami property owners? Well, the government wants to find out exactly that and unmask such people and punish the offenders. Already the institutional framework has been strengthened 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 1 November, a transaction is named ‘benami’ 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.

Many among us have often casually side-stepped the law, and officials too are habituated to accepting bribes, so we have built an environment where corruption, greed and all the vices thrive. Thus, the corruption do-away move necessitates equally supportive laws and strict organisational framework backed by active regulatory authorities to stamp out benami transactions.

People with surplus black money had been keeping it safely hidden from the government by buying property in fictitious names, thus on paper they were not the owners but enjoyed all the benefits. It is assumed some corrupt political leaders, government officials and developers are the ones indulging most in benami transactions.

A senior real estate consultant is of the view that benami property transactions see a boom during various scams which our country has been witnessing from time to time. So right from chara ghotala of Lalu Prasad Yadav that came out in the open in 92-93 involving Rs 950 crore to Sukhram’s telecom scam and subsequently their holding of unaccounted assets and such other notorious scams where big amounts of money where quickly invested in properties far and away. Black money has always found a safe haven in properties in Delhi, NCR regions and Tier II, Tier III towns, albeit in unknown names to escape the law.

Now, under the amended law, all those benamdars and the real owners, who have been indulging in bogus transactions since the period the original Benami Act was formulated, will find that there is no escape route if they are identified, for not only will they will have to forego property but their property will also be impounded by the government and, moreover, they will be liable to face imprisonment or penalty as the case may be.

The amendment to the Act states a change in the earlier penalty from 1 to 3 years and from 1 year rigorous imprisonment up to 7 years, and a fine which may extend to 25 percent of the fair market value of the benami property. The district registrars and land record departments will dig out the names of benami property holders. “What this essentially means is that a lot of responsibility lies on the initiating officer for tracking a benamidar. Secondly, a network of players, the initiating officer, the approving authority, the administrator and the adjudicating authority, all have to work in tandem to establish a property as benami,” points out Anuj Puri, Chairman & Country Head, JLL India.

The real estate sector has lately been witnessing a series of corrective measures. First, the Real Estate (Regulation and Development) Act, then the Land Acquisition Rehabilitation and Resettlement (Amendment) Bill 2015, now the Benami Transactions Act that are all aimed at making the sector more transparent and a professionalised one.

Through the crackdown on benami property, title risks, which hitherto undermined the buyers’ confidence, will be done away with. Also, the amendment will have a greater impact on benami transactions happening on a larger scale in agriculture land.

Moreover, exits by funds participating in transactions will be quicker. Our PM’s exhortation: “If you haven’t realised what I am made of, then do now”...clearly foretells his firm intent as he is out to expose the benamdars and with that the mystery of the real owners.

The government strategy now comes across clear; it is fortifying the banks with cash and aims at solving the problem of scarcity of land by taking strong action against benami property as soon as the monetisation drive gets over. And the good thing that may happen post the benami investigations, said to begin in January 2017, is that a lot of land inventory may become available to the government which the Union Minister of Urban Development, Housing and Urban Poverty Venkaiah Naidu may open up to use in fast-tracking the affordable housing plans for the poor, for only 3 years would remain to execute that goal.