After Prime Minister Narendra Modi's shock decision to ban high-denomination currency notes in November 2016, people have come to expect such moves from him. He won several elections for his party, the BJP, while economy had still not emerged from the impact of demonetisation. It seems if he can convince people he is cracking down on the corrupt, people will support his move, however disruptive it is.
One such move has been long expected—a crackdown on benami immovable property. If Modi has planned for it, he will trigger it in 2018 which would be right ahead of the next Lok Sabha elections. It cannot be better-timed as any mass-scale, visible action against corruption is sure to give Modi a lot of electoral benefit.
Given its huge disruptive influence on real estate market as well as politics, a crackdown on benami immovable property has the possibility of hogging the headlines all through 2018.
Has it already been planned?
Demonetisation was a sudden move but had actually been in the works for close to a year. Benami property had been in Modi's cross hairs for long. That's why he brought the Benami Transactions (Prohibition) Amendment Act, 2016. While the 1988 law and the 2016 amendment are unequivocal on confiscation of benami properties, the amendment adds punishment for those who deal with sale and purchase of benami properties.
The amended law provides that anyone attempting to "alienate benami property to frustrate provisions of any law, he will be liable to punishment for a minimum period of one year imprisonment and which could go up to seven years imprisonment". The law also makes it an offence if any benamidar provides wrong information to authorities or furnishes wrong documents.
The amended law came into force just a week before demonetisation. Since it applies to both immovable and movable property, it was required before demonetisation as the government must have expected many to deposit black money in the name of others. The income tax department has already frozen benami bank accounts holding funds of about Rs 1,800 crore.
Most of the black money in India is stashed away in benami properties such as gold and cash and also real estate. The government has used the benami law on bank accounts but has yet to use it to confiscate real estate in any significant manner.
The signs of a crackdown
Days after declaring demonetisation on November 8, 2016, Modi said in a speech in Goa, "This isn't the end. This isn’t a full stop, I declare." As if giving a clue to things to come, he mentioned how many bureaucrats in Delhi have benami flats in Goa. That was an ample indication that the amended benami law was not just for black-money deposits in banks after demonetisation but also for black money hidden in real estate in the form of benami property.
A few days before the first anniversary of demonetisation, Modi himself raised expectations. Speaking at an election rally at Sundernagar in Himachal Pradesh, Modi said, "Their [the corrupt politicians] worry is that the benami assets like land, flats, shops they have kept hidden like Rs 500 and Rs 1000 notes are not going to be spared. Therefore, they are creating an atmosphere so that before Modi raises a storm over benami assets, they observe Black Money Day and mislead the people."
This was a significant sign that a crackdown on benami real estate is coming. And year 2018 is the only time Modi has for such a crackdown since 2019 will be the year of next general elections.
The Aadhaar link
Many believe mandatory linking of Aadhaar with property could be the first step to a crackdown on benami real estate. For the first time, a Union Cabinet minister indicated last month that Aadhaar linkage with property transactions would be made mandatory. Union Housing Minister Hardeep Puri said he had no doubt the linkage would happen. Speaking to ET NOW, Puri said such a move would go a long way in sucking out black money from real estate and also help in crackdown on benami properties.
However, a few days ago, Puri clarified that there was no proposal to make Aadhaar linkage mandatory for property transactions. In a written reply in the Lok Sabha, Puri said the rural development ministry had advised the states and union territories to explore the possibilities of using "consent-based Aadhaar authentication" for registration of properties under the provisions of the Registration Act, 1908. This shows that the government believes there real estate could not be out of the Aadhaar ambit.
Modi's best weapon for 2019?
Big crackdown on benami property will have the high visibility of demonetisation without much impact on common people. It can be more helpful to Modi in elections than demonetisation. Away from the headlines, the government has already started acting against benami properties. Unlike an all-out attack as it happened in case of demonetisation, Modi has given a cold start to the war on benami properties. The concerted operations against benami property, which includes real estate too, have resulted in attachment of assets worth Rs 1,833 crore by the I-T department till October. Last month, Central Board of Direct Taxes (CBDT) chairman Sushil Chandra said tax department would scrutinise everyone who had property valued above Rs 30 lakh. That can blow the cover on most benami properties. But Modi's action against benami real estate has yet to turn into an all-out war. Maybe the government is still preparing before it scales up the crackdown. That can happen within 2018. And if it does, it will be one step by Modi which will obscure the rest of the political discourse in the country.