While most in Mumbai scramble to withdraw banknotes they can actually use, some others have found a way around the Centre’s move to scrap old Rs500 and Rs1,000 notes — they are striking deals with builders who are ready to take the old notes in exchange for a premium amount, which of course, is charged in black.
The November 8 shock announcement to demonetise the notes was aimed at curbing the circulation of fake notes and weed out those with black money. Prime Minister Narendra Modi has ever since been talking of the move as one that would help the poor and put an end to black money. In Mumbai’s real estate sector, however, the black money is thriving, sources said.
Buyers who want to get rid of unaccounted money and builders who want to offload stock are working together.
This is how it works.
According to real estate research firm Liases Foras, a property worth Rs1 crore is being sold for Rs1.25 crore — the agreement states Rs75 lakh that is paid by cheque; the remaining is paid in cash, in old banknotes of Rs500 and Rs1,000.
“Many builders have managed to sell unsold inventory by taking advantage of the demonetisation,” said Pankaj Kapoor, CEO, Liases Foras.
“The scrapped notes are being used to repay loans taken from private lenders, for payment to contractors, to buy raw materials, to pay off some investors and to even bribe officials,” said real estate expert Ajay Chaturvedi.
But this is risky business, Kapoor said.
“These deals are certain to come under the scanner of the Income Tax Department. These are highly risky deals and buyers will be exposed,” said Kapoor, adding I-T officials are keeping a close watch on such transactions.
The real estate sector is already known for being a parking spot for unaccounted money. Builders too prefer to transact in cash.
This has been for years attracting investors with black money to park their cash by buying houses, creating a scarcity of houses in the market and pushing up prices further. The demonetisation move was expected to put an end to such speculative buying and bring down prices.
The Maharashtra Chambers of Housing Industry (MCHI), however, said such transactions were rare.
“There is no scope for taking black money as the entire amount is transacted by cheque in Mumbai and areas around the city,” said Tejas Vyas, committee member, MCHI.