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Year after demonetisation, real estate boom in Gujarat churns out ‘black money’

The rebound is noteworthy especially after transactions across Gujarat fell by 43 per cent towards the end of November 2016, the month when demonetisation was announced.

Written by Avinash Nair | Ahmedabad | Updated: November 14, 2017 7:44:00 am
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A year after demonetisation brought the cash-rich real estate sector to its knees, property transactions across the state have rebounded, crossing 5.74 lakh deals in the last 12 months, with Surat emerging on top of all 33 districts, clocking over one-lakh deals. Though the total number of deals struck across the state, from November 2016 to October 2017, currently stands just nine per cent less than those recorded the previous year, real estate developers here say that except for a temporary glitch, demonetisation hardly had any effect on the sector that continues to deal in cash and churn out black money.

The rebound is noteworthy especially after transactions across Gujarat fell by 43 per cent towards the end of November 2016, the month when demonetisation was announced. For instance, the largest property markets of the state —Surat and Ahmedabad —recorded a little over 3,000 transactions during November which was half of those recorded in November 2015. Data sourced from the office of Inspector General of Registration and Superintendent of Stamps, Government of Gujarat, shows that between November 2016 and October 2017, Surat recorded a total of 1,19,652 real estate transactions, the highest among all the 33 districts. For the corresponding period, Ahmedabad recorded 92,593 transactions, which is 29 per cent less than those recorded in Surat.

The data sourced from the Gujarat government represents sale deeds of all kinds of agricultural and non-agricultural land dealings, industrial land, housing units and offices. However, the rebound has not come as a surprise, since business rebounded in December 2016 itself with the total transactions growing by 70 per cent as compared to the business in November. Surat recorded a 200 per cent increase in transactions in December and Ahmedabad over 100 per cent. “There has been no effect of demonetisation on real estate developers here. Those involved in land dealings did face some problems, but even those were ironed out in first three months,” said Ashish Patel, president of GIHED (Gujarat Institute of Housing and Estate Developers), a chapter of pan-India body CREDAI.

Interestingly, 16 per cent of the total transactions were done in the month of June 2017, just before the GST (Goods and Services Tax) was implemented. Real estate developers and experts have said that though the cash component, black money, has reduced, it continues to remain on the higher side —about 30-40 per cent —in sales of luxury homes. This is largely due to the gap between the jantri rates (the government assessment of value of real estate properties) and the prevailing market rates. If, in Ahmedabad, a person is looking to buy real estate in Bodakdev locality, the jantri rate is Rs 22,000 per square metre. However, he/she will have to shell out more than Rs 1.5 lakh per square metre to make a purchase. “Fool-proof steps have not been taken to ensure new piles of black money is not generated and so the trend continues,” Patel added.

The problem of black money continues in real estate sector because the state government has failed to increase the jantri rates. The last revision was made by chief minister Narendra Modi in 2011, when Jantri went up as high as 400 per cent in some locations. “The quantum of the cash dealings have surely gone down. But cash continues to dominate in high value deals especially in luxury homes, showrooms and other commercial transactions,” says Dipak Patel, managing director of Siddhi Group, a leading developer in Ahmedabad.

Builders say that despite the transactions in cheques rising in deals involving office spaces, affordable houses and mid-income houses costing Rs 50-75 lakh, the state government needs to do much more to plug the creation of black money. Government officials have said that a revision in jantri rates was under consideration, but was not implemented as 2017 was a poll-year.

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