Black money in Indian real estate. Cancellation of the home you booked. A case study.
The transaction: Rohit liked this nice, 3BHK home in a decent locality in Lucknow. The construction was about to commence and the pricing was just right for him. His wife liked it too and they saw this dream of starting their lives together in this home. They had booked their new home in January, 2010 and the possession of their home was due in August 2012. The payment schedule was construction linked as it is in all projects under construction. However, 30% of the entire payment was to be made in cash (read black money)! With some help from family and friends, Rohit raised this 'cash' with difficulty and had to make this entire payment at one go before the builder would sign the agreement for sale. This is the norm in India when it comes to paying the 'cash' or kachcha part of the deal. There were no receipts and this entire amount was off the record. That was the transaction.
The opportunity: Rohit got an email from his employer in April 2011, telling him that he had been a great performer and his services were needed to develop the company's business in Australia. He had to move to a different country by August, 2011 and stay there for ten years. The package was super and it was the opportunity of a lifetime for Rohit, who had grown up in small town Lucknow.
The hurdle: Rohit and his wife decided to cancel the home they had booked, get their money back from the builder and use that to do something for themselves in Australia and leave half of it as a security for Rohit's aging parents, who were staying back in India. However, 30% of the entire flat cost was paid for in cash for which Rohit had no receipts! The builder refused to refund this cash and also asked them to pay a huge penalty for cancellation of the apartment at such a stage. Was there any legal respite for Rohit? No. That transaction did not formally exist!
Finally: Rohit and his wife have left for Australia yesterday. The only option they had was to wait for another year, take possession of the apartment and then try and sell it themselves. There is little saving in the bank and Rohit feels anxious about his folks alone at home without substantial financial backup.
Would you still like to continue encouraging black money in real estate transactions in India? I would not. Life takes a moment to change. We could be prepared to handle it. Or, we could not be that lucky. Give this story a thought. It may make sense to you. :) Post your comment using the feedback form below.
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