News: Home sales, benami deals grind to a halt-08.01.2017

Date created 08.01.2017 19:07:16

Home sales, benami deals grind to a halt

MUMBAI | BENGALURU: Real estate sales have come to a standstill across key markets and fallen in some places by nearly 20% in the last 50 days following the government's demonetisation of high value notes on November 8. Both demonetisation and fear of action under Benami Properties Transaction Prohibition Act have dissuaded investors, while end­users are waiting for interest rate cuts and price correction. While the crackdown on Benami properties is likely to be fraught but authorities would look to match income levels with property value to establish ownership of disproportionate assets. Property brokers say home buyers are now waiting for the Union Budget and expect tax benefits apart from reduction in housing loan rates. “Markets, including north India's tier I and II cities, Rajasthan, Madhya Pradesh, Gujarat and Kolkata have experienced an estimated 15­20% hit on sales during the last quarter ending December 31.Specifically , during these 50 days following the currency ban... the number may have increased to 30%. In Western and southern cities, the impact was relatively lesser,“ said Pankaj Kapoor, MD, Liases Foras Real Estate Rating & Research. “Post November 8, there was no activity across markets and right now, the market is in a reset mode while preparing for new methods and clear designs,“ he said. Kapoor expects the sluggishness in market to continue until actual reduction in interest rates and property prices that could be a reality in the next few months. The government recently amended the Benami Transactions (Prohibition) Amendment Act, 1988. Any violation of the act will be punishable with imprisonment of up to seven years and confiscation of the property without any compensation to the owner. The act will cover movable, immovable, tangible and intangible properties and include any right or interest in such property. The amended act has provided powers to the government to confiscate properties or assets held in other person's name or under fictitious names to evade tax and hide unaccounted wealth. “It may be a tedious task, but authorities can always check income levels of property buyers and match it against the property values at the time of buy ing the same. This can easily throw up cases of disproportionate assets owned by entities with lower income. Following this, notices can be sent to such people and if the explanation is not satisfactory, they are subject to further questioning, such properties can also be impounded by the government ,“ said Abhishek Goenka, Partner Tax & Regulatory Services at PwC. According to property brokers, most Benami transactions are usually executed through general power of attorney. In few cases, fictitious names as well as addresses were used to register such properti es. But, owners of such properties will find it difficult to retain control on these as the authorities start screening and scanning. “There are people who are looking to sell even at as much as 30­40% discount to the market prices. In Delhi­NCR, prices of such properties have already come down significantly in some areas such as Sainik Farms,“ said one of the brokers on condition of anonymity. Lot of these benami properties actually belong to politicians, bureaucrats and high networth individuals (HNI). In NCR, most Benami properties have been built through farms and land parcels.Until November 8, these transactions were taking place in Gurgaon, accor ding to brokers operating in NCR market, he said. However, the scenario has changed drastically after demonetisation and the market has remained lacklustre since. “Post demonetisation, there have been no deals at all as people are awaiting clarity on government moves and policy.Buyers are scared the transaction may attract tax authorities' attention. Residential properties in Gurgaon are already trading below 2008 prices,“ said Abhay Khemka of Khemka Investments & Properties. Khemka said chasing Benami transactions will be futile as it will be difficult to track these transactions. But, quite a few are optimistic that technology and digitisation would lead to unearthing of such transactions. “With the advent of technology and data mining, the enforcement teams just need to join the dots and map the property to the original owner. Buyers will no more be able to hold property under general power of attorney or paper holding companies once the Benami Act is implemented,“ Prashanth Sambargi, Partner, Mars Realty. In the backdrop of the government's ongoing efforts to unearth black money and probable action against Benami properties, lawyers are also inundated with queries on possible action under the recently amended Benami Transactions (Prohibition) Amendment Act; a clear indication of panic and fear among actual owners of such properties.