Real Estate Developers Con Buyers
Reading the headlines, you might think….”so whats new !!”. And you are correct. Real estate developers as a general class come way down the moral and ethical ladder of society. Their main aim in life is to make money. Everything else be damned. There is scant concern for the product they deliver or the damage they do while delivering it.
Of course, I realize that this is a very sweeping generalization, and that there are some good developers. But then they are a very rare breed.
With the recent boom in housing and real estate in Bombay and all over India, it is not surprising that developers are finding new ways to evade tax, and make more money for themselves, and the buyer be damned. The supply and demand scenario is skewed in favour of the latter and hence they can get away with it.
If you go to buy a home in Mumbai today, chances are you will be told nothing is available and the only way out is to buy smaller flats and combine them. But in reality, it has nothing to do with availability. Many builders have devised a rather innovative way to evade tax running into hundreds of crores – just combine smaller flats and sell them as bigger apartments, and in the process pay no income tax at all. [ link ]
The windfall from this only goes to the pockets of these developers.
With property prices rising, these builders are making a killing, while you struggle to buy that small dream home. The income tax authorities have just busted this racket after a series of raids. But this deception begins on the drawing board.
But the sad part is that in some way, we fellow architects are also to blame for this. Or to put it more correctly we are party to the crime in some manner
The layouts on paper show small flats of one and two bedrooms – all of them less than thousand sq feet. The architect gets the drawings sanctioned by the authorities. But then, brick by brick, the plan on paper de-constructs itself into a different reality. The one bedroom flat may suddenly not have a bathroom or the two bedroom flat will be missing a kitchen.
It is not often that the government does something correct. Yes as unpatriotic that may sound, its ground reality. Thus when in
In 2001, the government launched a scheme to promote construction of low cost housing. Section 80 ib, sub section 10 was introduced for builders, who undertook projects on an area of not more than 1 acre. They were entitled to complete tax exemptions on profits made from selling flats less than a 1000 sq feet in Mumbai and Delhi. Now, builders get their plans approved, ensuring no flat is over a 1000 sq feet but once construction begins, a very different layout hits the floor.
A lot of other agencies are involved in this too. But since its a win win situation for most of the parties involved, except the government, who cares !!
However, this practice is rampant. Uncovered found out how buying a flat over thousand square feet in size actually means buying more than one apartment. In fact, agents don’t bother to hide this way of tricking the income tax department of crores. As an agent in the sales office of a swanky new residential complex in suburban Mumbai says, “We are having a problem regarding income tax, so we are separating these two flats that are individually below 1000 sq feet. But we give 3 bedroom flats with 2 separate agreements.”
However there seems to be a glimmer of hope
The income tax authorities had been keeping a watch on this practice and were waiting for some of these projects to be ready for possession, before striking dowon on this practice. But experts feel there should be more checks while construction is ongoing. In Mumbai, the onus is on BMC engineers to ensure that the reality matches up with the approved blueprints.
Original article here