Govt must weed out benami ownership

As widely reported, the state-owned National Buildings Construction Corporation (NBCC) is in talks with Jaypee Infratech’s Committee of Creditors as a strong potential suitor for taking over its business. Its homebuyers have been left in the lurch, and the government is rightly trying to ameliorate their lot through sweeteners for the potential suitor, so that the half-built flats can be completed and work can be started on those that are yet to take off.  This article, however, is not about the plight of homebuyers abandoned by unscrupulous developers but about the “benami” properties and their deleterious effect on the economy. (Benami property is any property that has been bought in the name of another person.)

The re-energised and rechristened Prohibition of Benami Properties Transactions Act, 1988 (enacted in November 2016) puts the fear of God into those who hold benami properties as well as those who are in cahoots with them — i.e. those who lend their names. The Central Board of Direct Taxes (CBDT) is the lynchpin under the new-fangled law, which is empowered to confiscate benami properties without compensation.

It redounds to the credit of the Narendra Modi government that it took the bull by the horns and walked the talk, whereas earlier governments had been non-committal on the issue — so much so, that right from 1988 through 2016, benami properties simply could not be confiscated in the absence of a machinery to do so.  Those in the know aver that the pusillanimity and passivity in this regard had more to do with protecting their own — every political party does have skeletons in its cupboards. Be that as it may.
 

Apart from losing the property held benami, both the ostensible and real owners have to cool their heels behind bars for up to seven years. A fine up to 25 per cent of the fair market value of property held benami is also leviable, which could well turn out to be the final nail in their coffins. The fact dredged up by investigators that a lot of flats have been booked in the name of benamis is significant. That they did not show up when the list of flat owners was compiled also prima facie hints at the more brazen form of benami holdings — holding properties through ‘ghosts’ or non-existent persons.

The more common practice is, of course, to hold them through fictitious persons or “name-lenders”. But then, it is entirely possible that the Jaypee benamis belong to both genres. If ghosts cannot surface except in movies and television serials, name-lenders can chicken out, especially if they have been careful to hide their identities at the time they booked the flats and paid in cash.  So kinds both can be elusive.  

An all-out effort must be made by the investigating agencies to smoke out the name-lenders.  Given the will, it is not impossible to do so and read out the riot act to them. The builder and his staff too would sing like canaries if pressured, because they would be privy to the details of the clandestine acts of the ostensible as well as real owners.  

It is common knowledge that real estate and gold are preferred areas for parking black money, more particularly its supposedly inscrutable subset — benami properties. The Jaypee revelations are a godsend, though admittedly, they must be only the tip of the proverbial iceberg. But then, what the country requires is a display of ruthless and uncompromising will by the government in stamping out corruption and black money.

Firm and quick action would send shivers down the spines of the collaborators in the game, namely the ostensible and real owners of properties. Benami properties attract crooks, given the slab rate of income taxation, and it also facilitates escape from scrutiny under the “wealth-disproportionate-to-known-sources-of-income” norm applicable to public servants under the Prevention of Corruption Act. 

Parenthetically, it may be mentioned in this context that the government’s move to link all immovable properties with the Aadhaar number of the owners is welcome. If bank accounts can be linked to Aadhaar and the Permanent Account Number or PAN, there is no reason why immovable properties should buck the trend. It must, however, be admitted that this move would only eliminate the ghosts but not the name-lenders, because they do carry photo-identity cards.

Nevertheless, the proposal must be implemented in all earnestness and with dispatch. With registrars insisting on PAN details, especially where the consideration is more than Rs 50 lakh (tax at the rate of 1 per cent needs to be deducted in such large deals by the buyers), and PAN being linked to Aadhaar by and large, the danger from ghosts is indeed not as much as the danger emanating from name-lenders. And this danger is likely to survive and outlive the property-Aadhaar linkage.