IMPACT OF BLACK MONEY IN PROPERTY VALUATION
Saturday Brainstorming Thought (316) 28/02/2026
By:-Er. Avinash Kulkarni
9822011051
Chartered Engineer, Govt Regd Valuer, IBBI Regd Valuer,
Rera Certified Consultant, Black Money Act Regd Valuer
Black Money heavily distorts property valuation by inflating market prices beyond realistic, registered valuers, creating a two-tier pricing system (registered price vs actual cash transaction)
This makes true market value, complicates mortgage lending due to unreliable data, and fosters high-end speculative bubbles ttat reduce housing affordability for the general public
Key Impacts of Black Money
1) Artificially High Prices
The injection of illicit cash, often used for speculation in urban land, drives up property prices, making them unaffordable
2) Distorted Market Data
Because transactions are often underreported to evade taxes (stamp duty/capital gains), official records do not reflect actual market value
3) Mortgage Valuation Challanges
Valuers struggle to assess the true worth of property for loans, as comparable sales data is unreliable
4) Duel Pricing System
Transactions often have a low official value (for tax/stamp duty savings) and a high undisclosed cash component
Black Money
Black Money is the currency used in black economy
The money that is generated by illegal activities or under ground activities likes drugs dealing, weapons trading that is kept secret
This money is also not accounted to the fiscal authorities
Black Money is generally received in cash form
Reasons of generation of Black Money
1) Taxes
2) Political activity
3) Law property in documents
4) Basic needs
5) Legal activity
6) Any other reasons
Consequences of Black Money in Property Valuation
1) Loss of Revenue
Governments lose substantial income through reduced stamp duty and registration fees
2) Reduced Affordability
The artificial hike in property prices makes housing unaffordable for the general population
3) Increased Future Liability
Buyers who purchase property using a black money component often face higher capital gains tax liabilities when they sell the property, as their recorded cost of acquisition is much lower than what actually paid
4) Risky Transactions
Cash-based deals are highly risky and vulnerable to fraud, with limited legal resource if the deal is cancelled
5) Market Distortion
The black money acts as a cushion for price falls, preventing a correction that would occur in a truly competitive, transparent market
Regulatory Measures to Curb the Impact of Black Money
1) Section 50C of the Income Tax Act
Mandates that if the sale price is less than the Stamp Duty Value (SDV), the SDV is considered the sale consideration for capital gains
2) Benami Transactions (Prohibition) Act
Aims to stop the practice of holding property in someone else’s name to hide the source of funds
3) Real Estate Regulatory and Development Act (RERA)
Aims to increase transparency in project, developer and transaction details
4) Aadhar/Pan Linking
Increased scrutiny of high-value transactions to track untaxed wealth
Measures to be taken to reduce black money in the property market
1) Amnesty scheme by the government
2) Simplify/Rationalize tax laws
3) Reduce red tapism
4) Use technology for economic intelligence
5) Co-ordination with other countries
6) Stringent laws to curb money laundering/corruption
7) Creation of awareness among students on the evil of black money
8) Regulation on election spending and donation to political parties/organizations
Fact – Every year almost 80000 people travel to Switzerland
Out of these around 25000 travels frequently
Those who travel frequently might be travelling for some reasons, this should be investigated
Impact of Black Money on Indian Economy
1) Loss of revenue to the government and running of parallel economy in the country
2) Vicious circle as a result of Black Money and corruption
3) Effects on national income and real capita income
4) Decrease in quality of public goods & services
5) Higher taxation and inflation
6) Difficulty in the formation of monetary and fiscal policy
7) Increased criminal activities in the society
Macroeconomic impact of Black Money
1) Loss of tax revenue
2) Widening fiscal deficit
3) Ineffective monetary & fiscal policy
Market and Social Consequences of Black Money
1) Higher inflation
2) Increased wealth inequality
3) Erosion of governance
4) Distorted statistics
Magnitude of Shadow Economy created by Black Money
1) Recent Estimates
Credible estimates suggest the shadow economy in India can account for roughly 20% of the GDP
2) Illicit Outflows
Reports have highlighted an average annual loss of approximately $64 billion in illicit financial flows over the last decade
3) Foreign Stashes
While not all are illegal, Indian deposits in Swiss banks were reported over Rs 31000 Crore as of 2023, reflecting a continued trend of offshore holding
Key legal limits on cash in property sales
1) Advances/Token Money (Section 269 SS)
A person cannot accept an advance or loan of Rs 20000 or more in cash for a property transaction
2) Total Cash Receipt (Section 269 ST)
A person cannot receive Rs 2 lakh or more in cash from a single person in a day or for a single transaction (even if split over multiple days)
3) Refunds (Section 269 T)
If a property deal is cancelled, any repayment or refund of Rs 20000 or more must be made through banking channels, not in cash
Penalties & Consequences of Black Money
1) 100% Penalty
Under Section 271 D or 271 DA, the penalty is equivalent to the entire amount received in cash
2) Tax Scrutiny
Unexplained cash can be taxed as undisclosed income at a rate of 60% or higher plus surcharges & penalties
3) Benami Property Law
If a property is registered at a value lower than the actual price paid (using black money), it can be investigated under the Benami Transactions Prohibition Act, potentially leading to confiscation of the property and improvement for up to seven years
4) Future Resale Issues
Buyers who pay a large cash component will face higher capital gains tax when they sell the property later, as they cannot legally prove the full original purchase cost
