Local Goa News

Wednesday, November 23, 2016

Black money will survive demonetisation, feel builders

PANAJI: Black money in the real estate and housing market is likely to survive the government’s demonetisation move, according to Goa’s builder community.
Speaking to this daily, builders in the state said that the problem “will probably reoccur” and “the government’s move to scrap high denomination currency notes may not get rid of the black money permanently.”

The builders said that black money in the industry exists in land deals and in the secondary market and it would be interesting to see how the government tackles it in the future. Local players in the real estate and construction industry said that they backed the government’s move to demonetise the high-value currency notes, as it could lower land prices and, therefore, decrease housing rates.
“Large property deals look unlikely for the time being and so black money in land transactions could come down by 60 per cent,” said K K Shekhar, director, Milroc Construction and Developers. “With land prices expected to fall, housing rates will come down,” he said. He, however, added that it is difficult to say whether black money will be completely stamped out.
According to Rajesh Salgaoncar, director, Gold Beam Developers, “The cycle of black money may not change but it certainly will be less because of the scrapping of Rs 500 and Rs 1,000 notes.” “It has resulted in less amounts of floating cash and people cannot withdraw large sums of money from banks easily to deal in black,” said Salgoancar. He added that builders do not generate black money but people with it park their funds in real estate.
According to housing industry players, black money in land deals and in the secondary market exists due to the capital gains tax (20 per cent of the total cost after indexation) and the tendency to evade it. It is more in the luxury and secondary home market where buyers and sellers understate the value to avoid income tax. However, a check reveals that black money is also prevalent in the primary market where there is a cash component in the sale price of a home. The percentage of cash payment though varies from builder to builder.
Nilesh Salkar of Salkar and Associates, Vasco, pointed out that the issue of black money is prevalent among the unorganised builders. “Organised builders accept payment in cheques, as middle-class buyers are availing of home loans,” he said and added that with housing companies extending more loans, builders have little space for black money.
On November 8, the central government demonetised Rs 500 and Rs 1,000 notes to crack down on black money, counterfeit notes and corruption. The real estate industry is expected to be significantly affected by the move because of the huge presence of black money in the sector. According to Goa’s builders, payments to contractors and raw material suppliers are done in non-cash transactions these days as most of them have bank accounts.

NT Network Goa News

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