How your dream house is contributing to the National Black Economy

In continuation of my last post I want to emphasize how your love for that home contributes to the National Black Economy(NBE). This is just like bribe, everyone hates it, against it but silently pay and get things done when their turn comes.

When you see a good house, you purchase even though the seller demands a portion of the money in black(unaccounted/cash), this contributes to the NBE. Then you register the house at lower price, save few bucks in stamp duty and bribe the register office fellows. Then the income from the house property(like rent) you don't add to the income fully. So just imagine how much a single real estate transaction contributes to the NBE and we just blame the politicians and bureaucrats for black money.

You think it doesn't bother you but the same black money affects you only, you only pay for it - When you pay a portion of the house price in black, you are providing a cushion for the price fall. Say you bought a house at 40L by paying 20L as black and registered for 20L(your loan is on 20L), now If the price drops you can not exit to protect the real money(which you have paid in black). So you will hold on to the property and show a brave face that you are sitting on a higher value house.

Banks also don't bother as they know the buyer will serve the loan to protect his own money than the house which is registered at low value. So in India banks loan are hardly defaulted by individual buyers. As the market price(even after fall, say it became 30L from 40L) is higher than the register price(20L). So bank can sell and easily recover the money, but If you sell its your loss.

Now the same black money the builders(also broker) received from you is invested in real estate in black. So they hold on to price fall(as they know that is just their unaccounted money,they are not paying any interest on loan) and they wait for some one like you to come for their rescue. This cycles goes on and you are trapped without your knowledge.

So think before paying in black to your seller or register your house for lesser value to save few bucks in tax.


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