Economic crimes, uncovered!

CNBC TV18, a leading business channel here in India is running an “uncovered” series” where they reveal some “economic” crimes. Last week they talked about something that most real estate customers know.

In fact, real estate deals, for common man, are always full of tax evasive illegal actions here and there.

There is this law in India where if a builder constructs an apartment smaller than 1000 square feet (short: sqft), he does not have to pay any taxes on it. CNBC talked about how builders abuse this law which is meant to increase supply of affordable housing in cities by encouraging builders to make and sell smaller units. But what the builders do is this. They plan multiple sets of small apartments on each floor in such a way that they can easily “erase” a couple of walls to join them into large 3 or 4 bedroom apartments. Oh yes, these to-be-erased walls exist on the drawings that are sent to the government for approval. No points for guessing that these walls stay only on the drawings.

construction

As a result, when you buy a large – say 1800 sqft – apartment, you buy 2 apartments “on the paper”, both less than 1000 sqft (if the builder is a real cheat), or one “regular” apartment and another small one (if the builder has some shame). What hit me about the CNBC report was this. Did they really uncover something? Everyone who has bought an apartment with 3 bedrooms or more knows this. Yes they do! And yet, we hear claims that a scam has been uncovered.

Next thing you know someone will uncover this. When you buy a plot of land, the seller is required to pay income tax on the sales proceeds. And the buyer pays registration charges – usually a percentage of the cost. So what happens all the time is this. The buyer demands and gets the true market price, let’s say Rs 1 million. But he gangs up with the seller to report that the deal was done for quarter a million. And they both save some money, effectively cheating on taxes!

Who doesn’t know this? But yes, we will all feign ignorance till some TV channel uses spy-cam journalism to uncover this “scam”!

PS1: Essentially, India is a country of selfish citizens. Single biggest thing we lack is “collective wisdom”. This selfishness – ‘my short term gain comes first’ – shows up in every field. More on this soon.

PS2: Not saying anything negative about CNBC TV18 here. At least they chose to talk about a “crime” we all willingly participate in.

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2 Responses

  1. Silkboard and all readers, Happy new Year.

    Btw, the above post is blog spam.It is suggested u delete it

  2. Thanks George, happy new year to you as well. And ditto to all the readers here!

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