The usual practice by cash-rich investors buying a piece of land or residential property but getting the same registered in someone else’s name (Benami transaction) would be a thing of the past. The recent amendment to the Benami Transaction Act 1988 has put in stringent mechanisms to track down such properties, confiscate such properties, besides putting the deviant in jail for up to seven years. A fine of up to 25% of the market value of the confiscated property, can also be imposed on “benamidars”. Since black money usually inflates land or property prices, the government’s legislative move would bring down land prices, thus benefitting the genuine home buyer eventually. The cost of land forms up to 35% of the overall price of residential or commercial property. “The long-term vision of the policy-makers is to link every property (commercial or residential) with the name of the person(s) actually paying for it,” said Ankur Dhawan, Chief Business Officer, PropTiger, an online property company.
Since multiple ownerships, false ownerships, as well as unknown ownerships plague the residential sector, especially in the mini-metros and non-metro markets, the mandated practice of adding the correct name to the property transacted will bring transparency in the residential markets, said Anuj Puri, Chairman & Country Head, JLL India. “With increased transparency, title risks will be minimised and buyer confidence during a residential property transaction will get a boost.” This would also help genuine developers in acquiring clear (as opposed to dubious) land titles, thus facilitating their efforts to complete projects on time. That only genuine stakeholders (as opposed to speculators) drive the real estate market, the amended benami act would ensure that “the general tag of corruption and unaccounted wealth, which follows most developers, will hopefully be limited to the few genuinely unethical players,” Puri added. Pushing speculators out of the market is also expected to open up large land parcels (hopefully at lower rates) for residential development.
The Narendra Modi government has introduced many steps to end malpractices prevalent in India’s notoriously opaque real estate sector. While the Real Estate (Regulation and Development) Act, passed early this year, aims to protect home buyers from malpractices committed by developers, the Benami Act puts onus on buyers of property to have it registered as per the new mandated norms. Digitisation of land and property records is another step to usher in a level of professionalism in the sector. Such steps will incentivise banks as well as private equity players to bring in more investment in the cash-starved real estate sector.