New Delhi: Then whispers of a law making it mandatory for individuals to link their property with their Aadhar cards is getting louder and, if and when it happens, there will be both short and long term changes in the real estate market in the country.
“We may see some decline in the second or third home purchases made by individuals. In order to avoid showcasing their actual wealth for the tax department to scrutinize, people often purchased immovable properties with their unaccounted wealth. Hence, second and third home purchases could take a hit as one of the primary attractions – tax evasion – will become impossible,” Anuj Puri, Chairman, ANAROCK Property Consultants told RealtynInfra.com.
However, the long-term implications of this move are good and will have very positive impact on the overall real estate sector by negating tax evasion, he added.
But bringing a law to this effect by the government is fraught with challenges. As Maneesh Gupta, Senior Director, Valuation & Advisory at Colliers International India, points out, “Aadhar card, unlike PAN card, is issued to individuals only. However properties can be owned by companies, trusts, HUFs, Partnerships etc. How would then Aadhar be linked.”
Government would have to find a way to link even properties owned by trusts, societies, companies and the like with some Aadhar card or the other.
Another challenge that such a law will have to pass is getting the legal stamp. “Will this policy, once it comes, stand the scrutiny of the courts of law. Government had to roll back mandatory linking of phones, insurance policies, bank accounts etc.(with Aadhar) as per directions of the courts,” points out Gupta. But he admits that the real estate market will become robust when it will become mandatory for properties to be linked with Aadhar and “governments, municipal authorities have a clear idea of ownership at the click of a button”.
One of the other advantages of the linking the properties with Aadhar will be the boost that secondary market will get. “While it may be a little futuristic, but a self-regulated and transparent market allows pricing to be determined more objectively. This will help the secondary market pick pace and firm up prices more than its possible impact on the primary sales market,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India. Even now, he said, it is seen that properties with clear and marketable titles garnering greater interest from potential buyers and this will continue for the right properties.
The linking of properties with Aadhar will also help in bringing liquidity in the system, according to Vikas Wadhawan, Group CFO, Elara Technologies-the company that owns PropTiger.com. “The unaccounted properties have artificially pushed property prices for people who require them the most. Such unaccounted wealth not only sucks the resources, but also chokes liquidity in the system for several years,” said Wadhawan.
Considering there are lot of property disputes, such linkage will solve some of those problems too. “Legal discrepancies including inheritance issues, property disputes, conjoined ownership etc. will also be addressed more efficiently with properly maintained records that can be accessed,” said Baijal.
Such linkage will also address some of the other malaise of the real estate industry. “Today in the country there is no agency that provides title insurance, even though RERA stipulates that developers take title insurance for all projects. Why so? Simply because tracing a title with 100% certainty, or even understanding the risk in the title is extremely difficult and so is prosecuting the guilty in case of defect.
We need laws such that title insurance becomes a reality, and for that, we need someone to be able underwrite the risk within a reasonable surety. Aadhar linking becoming mandatory according to me is still a bit far in future and if it happens, it is just a step and not the end, in the direction to get 100% transparency in property ownership. A lot more would perhaps need to be done,” said Gupta.
The linkage will also provide access to records for taxation purpose and will be helpful in establishing a proper regime, said Baijal. Such linkage will help create a nationwide database, on availability of housing stock in the country. The government would be able to frame highly effective housing policies based on analysis of such data, said Wadhawan.
Linking properties with Aadhar can help in infrastructure projects also, although indirectly. “Land acquisition is a big problem for the government when it comes to infrastructure development as it becomes difficult for authorities to identify and segregate the agricultural from non-agricultural land. If Aadhar is linked to property purchase, it will help differentiate the type and ownership of real estate in the country,” said Wadhawan.