> What goes on in peoples minds to believe in these things?
Anecdotally, RE is by far one of the largest destinations of black money. A friend is still unable to sell his flat 'coz he doesn't want to accept cash. Another has had to bring down the price from ~2Cr to ~1.7Cr, still no takers for the same reason.
Sure, all those measures (PAN etc.,) exist but so do enough loop holes. One common practice is to register the property at a super low (almost nominal) price compared to actual transaction amount. This is what I as a common person know. I'm sure those involved in daily RE dealings have more tricks up their sleeves.
The problems you describe aren't black money problems. These are problems related to overall demand and supply situations of the RE market, and in general the every day economic situation in India. They won't go away anytime soon because, urbanization trends have just started and almost everyone wants to come to cities for jobs.
Also don't forget bulk of India is poor with high birth rates, so you will have these problems for several decades may be even till the end of this century.
Bangalore alone gets hundreds if not thousands of people coming in every day. With that sort of demand, you can't run a housing market and supply homes at a cheap price. Nor will you be able to run a pure bank/electronic transaction based market. The reason for that is that the base infrastructure for such an economic ecosystem isn't ready. Even in Bangalore you have several hour long power cuts. And that is Bangalore. The rural centers have it way worse.
In all this your every day people, every one from street vegetable suppliers to cement and paint vendors for RE have to work seamlessly. That means 'cash' will be exchanged. Also merely cash being exchanged doesn't make it black.
Ultimately if you are buying cement, paint, steel, bath fittings etc. You are paying white money only, because it goes to registered and tax accounted compaies. Plus you can't buy a flat in any city from a medium and above builder in cash. No one accepts it. And yes, if you are buying a flat for 2 crores, you need to go in for a loan, which comes from a bank, so there is accountability at another layer. And registrations requires PAN, there you have door for audit open.
Another hard thing to come to terms with regards to Indian RE market is people invest in lands decades in Advance, These are not necessarily rich people, these are your ordinary businessmen, shop keepers, salaried masses. In Bangalore, outskirts lands are bought out like >20 years in advance for chicken feed prices, when the demand grows and people come to settle they are faced with impossible prices because investors have long bought the lands. Or they have to rent at exorbitant rates. Real estate is another of things where people with long term vision and enterprise to spend time physically, have a disproportionate edge over those who don't.
I have seen even top managers with top salaries end up with extremely bitter feelings and deep resentment towards common folks on the streets because the latter had the sense to buy lands some 20 years in advance and are now worth 20x more than the manager, despite the managers having 1000x a better career than them.
These problems are not going to go anytime soon.
And lastly even in the middle of DeMo prices didn't move in Bangalore. People who tossed around opportunities to buy flats at 50L-60L in 2008-2010 thinking they will buy in the crash period, were in for a big shock that prices are 1.2Cr-1.5Cr and the market didn't crash either.
The only way to win the RE game is to enter early and play. Come late or don't play you lose by default.
I appreciate you taking time to describe and I'm in 100% agreement. But none of those arguments substantiate your assertion that black money is non-existent in RE.
The fact is owners (not builders) of built houses are unable to sell them even 2years post DeMo because they don't want to accept cash. This has got literally nothing to do with paying for labourers, bathroom fittings as that payment has already happened.
I was responding to your dismissal of the GP's claim that RE is driven by and large by black-money. Specifically;
>>Crushing of Real-estate black market
> What goes on in peoples minds to believe in these things?
> Where is this non-existent black money in the Real Estate market?
The above statement just doesn't line up with the ground reality. Ask just about anyone who deals in RE on a daily basis. The real-estate-agent-shops are dime a dozen in Bangalore streets. They will straight up tell you that they expect you to pay a certain amount in cash (i.e., unaccounted) because the buyer doesn't want to show that money to tax authorities. This is how vast majority of RE dealings are done in India, the builders (i.e., RMZ etc.,) share of the pie is minuscule compared to untracked dealings.
> Ultimately if you are buying cement, paint, steel, bath fittings etc
A wise man once said RE is all about 3 key aspects;'location', 'location', and 'location'. But for location housing/building prices would be same across the country as cement etc., cost the same everywhere. So no, I'm actually not paying much for cement etc., as much as I'm for the location.
Just last week I visited a sub-registrar office in Mysore. Only couple of hours of observing activities there is sufficient to dispel the myth that black-money is non existent in RE. The number and amount of cash dealings going on there was mind blowing, PAN notwithstanding.
BTW this is just one aspect of RE. Then there's about farmland dealings. Just about every politician and govt employee of high ranking hide their cash in hundreds of acres of farm land by buying them in cash. This is not only black-money but also illegal too. You see the details in news all the time, when ED authorities raid a politician or public servant to unearth ownership documents of huge tracts of land.
tl;dr Indian RE is awash with black and illegal money. You either have to be blind or far away from ground action to deny that.
Anecdotally, RE is by far one of the largest destinations of black money. A friend is still unable to sell his flat 'coz he doesn't want to accept cash. Another has had to bring down the price from ~2Cr to ~1.7Cr, still no takers for the same reason.
Sure, all those measures (PAN etc.,) exist but so do enough loop holes. One common practice is to register the property at a super low (almost nominal) price compared to actual transaction amount. This is what I as a common person know. I'm sure those involved in daily RE dealings have more tricks up their sleeves.
So yeah, it's clearly not fictional.