After months of house hunting, the Karris finally zeroed in on a flat in Thane's Ghodbunder Road. "It was a newly built 2-bedroom hall kitchen (BHK) and the smell of fresh paint pervaded the air. It was going to be my dream home," recalls software professional Sucharita Karri. But, unfortunately the Karris never got a chance to stay in their dream home. "We went to pay the token money, and that is when the builder asked us to pay a part of the total cost in cash. Though we had heard that some builders demand certain amount of money to be paid in cash, we were shocked when this builder asked us to pay almost 40 per cent of the total amount in cash," said Karri.
Illustration/Jishu Dev Malakar
The Karris who were to buy the flat on loan, found it impossible to meet the builder's demand. "The flat cost Rs 25 lakh and we were asked to pay around Rs10 lakh in cash, which was too much for us," said Karri. Ultimately, she and her husband, who is a central government employee, had to give up on the flat. "We were heart broken," she said. After two months of intense search, the couple got lucky. "We finally found a house in Thane. We didn't have to pay in cash and the entire transaction was hassle free. We were lucky, I guess," said a relieved Karri.
Many middle class families looking for a flat in the over populated city, are now finding it difficult to afford flats within their budget because of the escalating real estate prices. However, their misery is compounded by the demand of a large chunk of the property prices in cash. There is no escaping the cash component, it seems. Agrees Sunder Sarma, who works in a multinational national company(MNC) from Nerul, "A few years ago, when I was looking for a flat in Kharghar in Navi Mumbai, I agreed to pay a small fraction of the total amount of money in cash.
Initially I was not ready for cash payment as it was against my principles but I finally decided to pay the amount as none of the builders were ready to accept the full payment in cheque." Later, Sarma was in for a rude shock as the builder started asking for more money. Initially Sarma had agreed to pay Rs 2 lakh in cash for a 2BHK flat costing Rs 22 lakh in Nerul. "But later the builder asked us to pay Rs 5 lakh and that's when I thought that enough is enough." Instead of searching for a new house, Sarma decided to renovate his current house in Nerul. "Initially I wanted a 2BHK so that my daughter, who is in Class 8, could have a separate study room but since I couldn't buy one, I have now made the balcony into a study room," said Sarma.
Regulate
Industry experts believe that there should be an official regulatory body to keep a check on black money transactions. Rajesh Buhecha, a real estate broker from Borivali, who had looked for a new place some years ago, said, "The lack of a proper body exclusively to monitor real estate related problems makes it tough for customers to file a written complaint. This is the case with every other complaint that one files with the Government, the complainant will have to run around in circles to get his complaint registered. After which, the person will have to run around to coax the authorities concerned to take action."
Deal
Real Estate analyst and CEO of the 1st Mumbai Properties, Sangeet Kumar, insists that a customer looking for a house must make the "mode of payment" clear to the broker. "If the broker has an idea about the financial condition of the buyer, he will then show him only such properties where the entire transaction can take place in cheque." He added, "When the customer makes his budget clear to the broker, the broker immediately simplifies his work by categorising them into the salaried or the businessman class. Accordingly, the customer will be shown flats which fall within the stated range."
Regulations
There was a check of some sort in the form of the 37(1) Act of the Income Tax, which unfortunately was scrapped recently. "The discontinuation of the 37 (I) Act of the I-T was a big blow on keeping checks on black money transactions in real estate," said Advocate Vinod Sampat, the President of Co-Operative Society of Residents and Users Welfare Association. According to the Act, any transaction of over Rs 75 lakhs would have to be notified to the I-T department that would then check if the property was undervalued. "Such a check on the transactions would have been useful especially in the absence of a regulatory body or a grievance redressal cell for consumers," he added.
But Kumar disagrees, "The process was already too time consuming. The problem is there are many people who buy property at a lesser price (less than Rs 75,00,000). A better solution would be registering or monitoring the way every transaction takes place. If a body or a society keeps track of the payment form, then payment and buying would take place in cheque."
Principles
In fact, many believe that the ubiquitous black money has become unavoidable in the real estate sector. "Everyone knows it exists and that they will have to pay the amount, when they decide to buy property," said Sampat. "The only thing that a customer can do now is go to a builder armed with a hidden camera, and record the whole transaction. The footage can be then used to file complaints against those who demand payment in black," said Sampat. Others believe that a complete system overhaul is needed to make transactions more transparent.
Said Kumar, "I am sure that if only cheque transactions are forced, a large number of flats in the city will remain unsold for a long time." At the same time, it is the customers who too are at fault. Many of them pay cash to builders, as applying for loans from banks is a process that they find, "cumbersome".
Explained Kumar, "A lot of builders who buy lands at auctions or mortgage property for deals prefer cheque payments and avoid cash completely. I have heard of cases where a company that owned a flat wanted to sell it off. They wanted full cheque payment but there was no one to buy it."
Reasons
Experts point out that black money over white money is being preferred due to a variety of reasons. One avoids paying taxes. But more importantly, many believe that the process is quicker and hassle free. Such transactions, however, have their own set of risks too. Ketki Dalal, a costume designer, who is currently looking for a 1BHK apartment in Andheri (W), said you pay cash at your own peril, "The builders are asking for a lot of money.
Once you pay cash to them, what if they claim that they haven't received any cash from you? There is no receipt to show that you have given them the money. So they can easily ditch you. At the same time you cannot seek police help because what you are doing is illegal too," Dalal has been looking for an apartment for the last two months. "I am looking for a flat within Rs 50- 65 lakhs range. But the builders are demanding 35 per cent money in cash, which comes to around Rs 25 lakh. Where do I get that hefty cash component from?" asks Dalal.
Demands
But it seems builders are not ready to compromise. When MiD DAY spoke to a builder in Panvel, who was ready to show 1 BHK flats worth Rs 18 lakh in the area but wanted some cash as part of the deal, he said, "Rs 5.15 lakh in cash please. Yehi market rate hai (this is the market price)." Another builder based in Borivali West quoted Rs 45 lakhs in cash for a 2 BHK flat. When MiD DAY asked, how much of the amount has to be paid in cash, he said, "Yeh sab bate phone pe nehi hoti. Aap milo hamse (We cannot discuss such issues over the phone. You have to meet us personally.)"
Similarly, another builder from Vashi said, "All that is negotiable but you will have to come to our office to see the flat and accordingly we can make the deal." When MiD DAY asked a Bandra based builder about a property at Thane, he gave a terse reply, "You should meet us and then we can talk about the deal." However, many developers and builders made it clear that they accept payment only through cheque.
Dream Home: Buildings sprawling across the city
Cash component
The inflow of black money increases with the increase in stamp duty and registration fees. A house buyer, who wants to save money, will ask for a cash component so that he doesn't end up paying high registration fees. There are more chances of black money exchanges when it comes to costlier deals. If a deal is worth Rs 75-80 crore, it will mean fees of Rs 75 lakh, which is a huge amount. The costlier the property, the bigger chance of black money coming in, say brokers and lawyers
I-T scanner
The Income Tax department is all set to carefully examine real estate transactions in various metropolitan cities. From funding of projects to property deals to mode of transaction, everything is expected to be scrutinised by the department. According to reports, the amount of assets seized by the income tax department has increased by many folds in the last few years.
