The Benami law was first approved by the Parliament way back in 1988. Benami, in Persian literally means “without name”. The law was originally introduced to check property transactions in which the real beneficiary of the transaction is not the one in whose name the property is purchased.
On May 13, this year, the Benami Transactions (Prohibition) Amendment Bill, 2015 was introduced in the Lok Sabha by finance minister Arun Jaitley. The bill seeks to amend the Benami Transactions Act of 1988 and introduce certain empowering provisions to the old bill to make it operational.
Benami bill compliments Modi government’s slogan – ‘bring back black money’. This was a promise made by the BJP during the election campaign ahead of Lok Sabha polls in 2014.
The government, through this bill, looks to tackle the problem of domestic black money. The real estate sector which does not have a regulator has become a safehouse to pump in black money. This has driven up real estate prices to levels, which most people cannot afford.
What is Benami Bill?
The Benami Transactions Prohibition (Amendment) Bill prohibits benami transactions, that is, any transaction made by one person in the name of another, with unknown sources of income. The bill sets out to prohibit black money transactions in the country. Any property held in benami will be seized by the central government and those found guilty will be punished with a fine up to 25% of the market value of the property.
Who does the bill impact?
Properties purchased by corporate firms in fiduciary capacity may not be considered as benami. The benami bill has exempted corporate firms, companies and associations from the ambit of the bill.
This, according to advocate RK Handoo is a big drawback of the bill as it allows “corporates to purchase property and play with the prices.”
Property held by a member of an undivided Hindu family is also exempted from the purview of the bill. It has also exempted properties acquired out of the known sources of income by an individual in the name of spouse or child.
Why should the bill be amended now? How does the common man benefit?
By giving the central government the power to confiscate property, the government is trying to create a land pool to contribute to its housing scheme. Government intends to dispose benami property and make it available for those who need it.
The latest Economic Survey (2015/2016) projects that India needs 1.88 crore housing units. The same survey also points out that more than 1.2 crore completed homes lie vacant.
In a survey done by KPMG, states, “By 2022, India needs to develop about 11 crore housing units to fulfil its housing demands. About 1.7 to 2.0 lakh hectare of land may be required to fulfil urban housing needs”.
Real estate expert, Ajay Vir Singh believes that the proposed amendments to the benami transactions law will enable the government to recover the unutilised benami homes and sell them under affordable housing scheme.
In a study done by FICCI, the real estate sector in India constitutes for about 11 % of India’s GDP.
With such a huge amount of money in this sector, it has become a norm for both buyers and sellers to transact only in cash, solely to evade taxes. Therefore when the Benami Transactions (Prohibition) Amendment Bill is passed by both houses of Parliament, it will serve as means to check the inflow of unaccounted money in the real estate sector.