Why there is black money in Real Estate?
The minimum amount at which the sale or purchase of a property can take place is called CR.
CR (Circle Rate or Collector Rate) is defined by the revenue department of the state governments.
On each real estate transaction one has to pay the Stamp Duty (which is in between 3% to 10% usually).
Market Rate: while the CR is defined by the state govt., the MR’s are governed by the Demand & Supply of the market.
Due to which it is invariably much more than CR.
i.e. MR >> CR
So, there is a mismatch between the prices of MR & CR.
A buyer has to buy at MR price. But they show on paper to buy it for a much lower price in order to evade stamp duty.
If you show on paper buying at MR, it will amount to more stamp duty.
The remaining amount to the seller can be given in cash, to which almost every seller agrees to.
So, if you are a buyer you just have to pay CR + Stamp Duty + Some Price Rise in white (via cheque/DD/NEFT/IMPS) & the remaining amount is paid in cash which could be black.
Once you have the ownership of property your black money has also turned into white.
## Ways to curb black money usage in real estate:
1. Reduce the stamp duty as it will encourage the people to buy on paper at MR price (which is the actual price of the land).
2. Increase the CR thereby reducing the mismatch between MR & CR. Often the CR prices are not updated regularly & hence amount to a great difference between the value of the two.
With Great Love,
Er. Amit Yadav