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Wednesday, 2 November 2011

Now Sheila aunty wants to fight black money

If you are a supporter of Anna Hazare and you are in the market to buy a house in Delhi, don’t complain if you have to spend twice or three times more on registering your property. The Delhi government has increased the circle rates — the minimum rate at which a property can be sold or bought — by 100%-215% in areas where you could possibly be seeking to buy your dream home. The hike, according to chief minister Sheila Dikshit, will help curb black money. So by paying more for registration, you will be contributing to a larger cause.

Doesn’t that sound too good to be true?

The reality is that if you are a middle class home buyer, you have already been edged out of the market in Delhi where realty dealers and the tens of thousands of custodians of ill-gotten wealth have artificially jacked up property rates to levels few salaried, honest people can afford to pay.

If there was any hope that the situation would get better, the Delhi government has shut it out by raising the circle rates for the second time in less than a year.

To illustrate, let us take the example of Vasant Kunj, which was until recently a sought-after destinations for many middle class buyers. But it isn’t any more because even a 2 BHK house costs more than a crore there. The circle rates have just sealed it at that. Since when has an Indian middle class family begun earning so much through the right means that it can buy a two-bed house for one crore or more. Clearly, if transactions have to happen at these rates the money in most cases would have been earned through unfair means.
The talk of black money is at best fashionable, and at worst, a hogwash. It would do nothing to curb black money. Because the absurdly high prices of property are a result of both the preponderance of black money and the lack of effective laws to regulate real estate. By seeking to align circle rates with market rates, Sheila Dikshit’s government has not only sought to legitimise the black economy but also deflected attention from the real issue of adequate regulation of the property market.

It’s a smart way of raising revenue for a cash-strapped government without increasing tax rates. If Dikshit had opted to increase stamp duty rates, she would have been criticised for going against the spirit of economic liberalisation that her party has so dearly embraced. But by increasing circle rates, she will not only be able to make up for the budget gaps caused by mindless spending during Commonwealth Games but also earn a tacit note of gratitude from realty dealers who get another pretext to jack up


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