Wednesday, January 14, 2015

Black Money, Dark Side of Real Estate!

Honesty is the best policy - when there is money in it….Mark Twain

No need to introduce one of the most humorous & witty writers of all time & in so less words he has described importance of honesty with money matters! Well real estate & money goes in hand but what about honesty? Don’t get surprised with the start as where this topic is leading? The book I wrote & various write-ups in columns have made me able to enter at some circles which I wouldn’t have been ever just as a builder! One such occasion rather honor came in my way when in last week I got a call from Mr. Ashok Kothawale of Majestic Publication. Those who are not avid readers for them it’s one of the oldest & respected publishing houses in book world of Marathi as well in many languages now. Apart from just book publishing the organization is known for their social contribution too, especially for Majestic Talk Show which popularly known as “Majestic Gappa”, in the social circles. It’s an event with nearly 60 years of heritage now where different topics are selected which are close to the heart of the society & every day two to three personalities from the field of the topic are invited. It’s open interview in front of fairly large & sensible crowd, which is conducted by equally competent personalities from the media!

Just as a builder I would have never got the call, as with due respect to my profession i.e. real estate, they doesn’t allow entry on this stage just for the money you have earned but what is your social or cultural contribution to the society is what it looks for ! Frankly about money earning, there also I don’t score much yet as I mentioned the book & some routine writing as well speeches I gave for environment & society, ensured me I am the better candidate when topic is Real Estate! Till I went there I wasn’t aware about the exact questions I am going to face but I like that way more as then you are ready for battle as you don’t know what’s going to be thrown at you! The other two invitees were Mr. Ketan Tirodkar, a renowned RTI activist rather more famous for digging “Aadarsh Scam”, which shook the real estate as well politics of the State & Mr. Hemant Desai, well known name in News Media for his study in Politics as well Finance! When I read these names I knew that the discussion won’t be just environment or real estate’s technical side but more on financial front of the industry & when its finance of real estate, black money was going to be at the helm! And so it went, the anchor  Mr. Nilesh Khare, a veteran from TV Media was to the point with first question to me with mischievous smile “Sanjay, what’s black money’s role in real estate, will you please guide us?”

Well somehow I played safe not going in specific details but the entire two hours questions as well points raised were about the black money & its impact on not just real estate but entire economy of the country. With Ketan & Hemant like stalwarts, they were ready with all references & names as well figures where as all I have was logic. And I in the very first go, declared that I am no way a financial guy rather I know as less about finance as any of the listener sitting in the crowd yet I am in the industry for nearly twenty five years is a fact; as well I do run my own company, so somewhat money I too have seen! With that much of exposure somehow I went through the talk show as most of the listeners were interested in knowing about black money as well its role in real estate & who has most of it, types information. There was no point in denying that there is no black money involved in real estate as even a five years old kid wouldn’t have believed me! So I explained  them, by me black money is something which you can’t show in account book as well can’t revel its details such as from whom you have received or to whom you have given & amount as well mode of payment etc! And by me everyone has some day & some place faced black money. Each of us has been sometime in life has jumped the signal & paid a green note to the hawaldar & needless to say it’s without receipt. We have been to Municipal Corporation for water connection or property tax or birth/death certificate & have got cleared the matter by paying some unaccountable amount. We have been exposed to MSEB for meter issue like change of name from earlier home occupant or a faulty meter issue & we have sorted it out again by under the table practices. The list of such jobs in our beloved country is endless & whenever such incidences are there & all the money used in these transactions is called black money at the end. Here I asked them, all of you guys here, now tell me who hasn’t touched the black money ever in life?  So on this nobody raised the hand & that shifted the focus of the interview back to main course i.e. Real Estate. After that it was corruption as well economics & high prices of real estate etc etc & the interview ended on positive note; but the issue of black money lingered in my mind.
As in our country black money & sex are two topics about which everyone loves to gossip & speak in private but no one is ready to share his or her personal encounter or experience about the same in public or even in close circles! Like these topics are taboo for the entire society making more & more people attracting to the discussion about the subject, especially black money. And surprisingly whenever the black money topic comes up everybody is very sure that all the black money or most of it either goes to Swiss bank or in real estate & that’s why builders are rich with black money. Many even goes to the extent of saying black money is parallel economy of this country & that’s why we didn’t suffered with the recession as when white money’s economy i.e. legal money, is in doldrums it’s the black money’s economy which kept the things rolling & stable! Well I repeat I am no financial wizard yet I understand one thing the above statement is like saying pain of heart break in love is receded by drinking alcohol! 

Joke apart rather the recession is outcome of black money getting stronger, as once we have understood the simple truth that black money is the money which you can’t show in your accounts then its means of generations are in mainly two ways. One is regular which we know & its corruption i.e. taking money in unaccountable manner for which you are getting paid by the govt or even the private organization in whatever job you are! And second is which is more wide spread & that is tax evasion! Many won’t know but more black money is generated by tax invasion by every business than by corruption & this is from the financial experts not just because I am saying. It’s logical also, as agreed we are a corrupt country, this too has been proved by various surveys & we do rank in top; yet how much individual can gather money even in corruption, there is a limit to it! But when the big corporate evade taxes, the kind of inflow is huge & this all black money either goes out of country or comes mostly in real estate mainly in land deals! Then comes the money generated through corruption in which govt officers, political leaders & high profile corporate individuals also comes. All these people collects the money which is unaccountable & it’s for the favors or even the routine jobs they do, in short every sign costs here! And the another aspect of corruption in govt or even private organization is not to do a particular work & show it as done & get money out of it. Or increase the valuation of a work & the increased amount is shared amongst all the concerned parties as black money! And here we conveniently forget that when its corruption generated black money then the taker as well giver both are equally responsible. Many will say what they can do but surrender to the authority who is demanding, but then that can’t be excuse for being party to the crime in the eyes of the law is a fact!

Now let’s see why everybody strongly believes that all such black money which remains in the country comes in real estate only? Why people don’t give names to IT industry or automobile industry for consuming black money? Answer is simple it’s the policies we have in real estate as well procedures involved in construction of the projects makes it easier than any other industry to accommodate black money! For e.g. the land which is basic raw material of the real estate. I have repeatedly discussed this issue that every product in this country has got MRP i.e. maximum retail price. This is the price above which one cant sale a particular product but land has no such MRP but the ready reckoner i.e. a price index decided by the govt says you can’t sale the piece of land below a certain price. But no upper bar of how much higher you can go above the ready reckoner price of a land. Land is limited & population is ever growing so in country like ours land prices have been always souring & as we don’t have upper bar so what price is above ready reckoner, never comes on record & all the unaccountable money i.e. black money can be consumed here without any hassle! Now the one who has invested this money will obviously wants it back so the builder who purchases this land from such person has to generate this black money at his end also, so the flat purchaser has to generate it too & the chain goes on! Then the hundreds of NOC’s required for even ten flats project too thousand flats project are also generation cause of black money. So here the builder has another hole to fill which eventually becomes one more source of consumption of black money in real estate.

This all can be stopped by applying simple common sense & making the land rates properly governed by the govt. Put up upper bar of land deals & ensure that it’s in tune with the market prices. We can even think of setting a separate system like share market for land deals, so all the transactions will be handled by a custodian, making all money involved accountable! Also there is a need to work out the proper taxation of profit generated through land deals as at present that’s another reason why people don’t show the original price of the land. As in some cases the tax on the profit in land transaction goes to nearly 30% which is termed as gain tax. Similarly a little bit of transparency & fear of law will make the project sanction process get rid of all the noc’s involved in building construction process. This will remove the generation as well consumption of black money from the industry. Why can’t like western countries we make very clear guidelines & development plans of city & make no need of sanctions itself? Let the architect plan the building as per norms & rules & just inform the local body what he is building. If it’s out of the rules then straight way demolish the entire thing without showing any mercy & prosecute all the concerned persons. And act on this in time so no one will dare to break the rules, not even public will book the flats in such projects without confirming its legality, as then only we can get rid of this demon named black money. As every such black rupee is a burden on the common man at the end & it includes each of us. This way the cost of every product gets rising unnecessary & at the same time the country gets less money for the development making us poor in infrastructure!

Black money is a curse to any nation as it makes few people rich & the country as well large numbers of its citizen gets poor. As I have already clarified that I am not an expert on tax evasion & tax reforms needed to make; but it’s equally true that more & more corporate should deal in accountable money only, for which govt has to work on to make such policies. At the same time for curbing corruption there should be more transparency in every sanction process & try to make most of the systems online including payments to the govt departments. There should be minimum human interface so as to reduce corruption tendency. Even the developed countries have corruption & tax evasions by corporate & generation of black money; as its human tendency but then the percentage is much less & most important common man don’t get suffered in the process! What I feel is there should be total no entry to the black money in real estate. Because it’s simple logic that the one who has black money will be no saint & then what can we expect from such people but fraud & bad service to the customer? So more such money in real estate means more bad people in the business which isn’t good for the industry is a naked truth. 

Unfortunate part is we all are so much accustomed to the term black money that we have forgot even the difference & sad  but jokingly I have heard many saying, “money has only one color & that’s green”! Even in the talk show I noticed one significant thing that all or majority of the crowd were of age above forty & I couldn’t see young faces. Is it an indication that younger genre has accepted the black money as their part of life or see no difference in black or white kind of money? If it’s so then it’s very alarming for our future. As black money is not just some notes of green color but it’s an attitude which reflects criminal or corrupt mind & if the younger generation of our country is of this attitude then we don’t need a horoscope reader to tell future of our country which is nothing but black!

Sanjay Deshpande

Sanjeevani Dev.

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