The news item relating to the introduction of the Benami Transactions (Prohibition) Amendment Bill in the Lok Sabha on May 13, the last day of the budget session of Parliament, may not have rung a bell in the ears of many an investor in real estate. However, avid followers of Union budgets from time to time would certainly notice the continuous efforts of Finance Ministers over the last three decades in unearthing black money and they would have flagged the possible repercussions of the Bill.
The present Finance Minister had also promised in his 2015 budget that such a legislation will be brought in early as part of the new Government’s plans on the black money issue.
Since the last half-a-century at least, there might not have been a single day when we would have gone through the daily newspapers/ television news channels without stopping at a reference to ‘black money’ or ‘unaccounted money’ at least half-a-dozen times.
Similarly, if one goes through the property or other investment related sales promotion columns, the cash transaction route will have its prominence almost everywhere, instead of cheque. It is common knowledge that almost one-third of Indians have had no bank accounts till the recent ‘Jan Dhan’ thrust.
If we go through the sale deeds registered with the sub-Registrars through the length and breadth of the country, there may not be even a single sale without payment in ‘cash’.
It can also be observed that many agricultural land sales are effected in the names of the tillers of land, may be due to the prohibitory laws in many States against owning land by non-agriculturists. In many cases, the sales of land also are registered in the names of relatives and friends.
‘Benami’ property holdersThe term ‘benami’ is used to denote a behind-the-curtain ‘owner’ who lends his or her name as a purchaser. The money, source of which is not known, becomes ‘black’. Some of our laws do not completely ban such transactions, though there are legislations like Income Tax Act, Undervaluation Rules etc., which have provisions to pave the way for locating them.
The first specific legislation on the subject was the Benami Transactions (Prohibition) Act, 1988. Based on the experience in implementing its provisions, the Government, in 2011, introduced another Bill with fresh/additional provisions, which was referred to the Standing Committee on Finance, the report of which was submitted in June, 2012. The Bill, however, lapsed with the dissolution of the 15th Lok Sabha. The 2015 Bill has also been referred to the Standing Committee on Finance. The Bill is likely to come up in the monsoon session of Parliament.
Some of the major provisions which are directly affecting the ‘growth’ of the real estate sector are:
· Purchase of property in the name/s of distantly related siblings, other than wife or children will be considered not legal.
· Ample provisions are included to prosecute violators
· Provides for attachment and confiscation of benami properties.
· Heavy penalties, both fine and jail term, are included as deterrent
· Fine to be imposed can be up to 25% of the fair market value of the property
The above are strong deterrents to benami property deals. Only time will tell as to how these provisions will affect the expansion of the real estate sector.
