Ban on cash transactions above Rs3 lakh to bring transparency in real estate
New Delhi: The real estate industry will come under more pressure to be transparent, with a Supreme Court-constituted special investigation team (SIT) recommending a ban on cash transactions above Rs.3 lakh.
In a report made public on Thursday, the SIT also suggested capping the cash holdings of companies and individuals at Rs.15 lakh.
The real estate sector in the National Capital Region (NCR), which is also the biggest property market in India in terms of volume, is already in the midst of a slowdown and may be hit by the measures.
A large chunk of black money in India is invested in real estate and bullion.
Property prices in the Delhi-NCR market have fallen as cash-strapped developers grapple with high inventories and a trust deficit among customers, according to a report by property consultancy firm Knight Frank.
However, the move may help tackle money-laundering in real estate. Liases Foras Real Estate Rating and Research Pvt. Ltd reported that in 2012, black money accounted for about 30% of the total transactions in real estate.
Finance minister Arun Jaitley in his February budget speech proposed that quoting of the permanent account number, or PAN, be made mandatory for any purchase or sale exceeding Rs.1 lakh and rules, such as transactions in immovable property worth Rs.20,000 or more cannot be done through cash.
Jaitley had added that measures aimed at disincentivizing cash dealings in real estate and other transactions will be put in place.
Paying stamp duty through cheque delays the registration of a property. With cash payment, registration is instantaneous, said a broker.
“During the registry of a house, many pay stamp duty through cash. However, that will get delayed now. Government should at least allow a limit of Rs.5 lakh, so that hand-to-hand transaction in registries can be done,” said Sachin Sehlot, owner of Sehlot Realtors and Developers, a brokerage firm in Ghaziabad.
There is already a limit of Rs.25,000 for cash transactions in real estate in Uttar Pradesh and thus the rule, if implemented, may not have much effect on the hidden transactions already happening” (in the sector as a whole), Sehlot added.