The government plans to enact the Benami Transactions (Prohibition) Bill, 2011, to replace the existing Benami Transactions (Prohibition) Act, 1988. The bill will be tabled in the monsoon session of Parliament.
According to Ashutosh Limaye, head, real estate intelligence service, Jones Lang LaSalle India, the new bill has many advantages for law enforcers. “Because of its more detailed provisions, it offers a wider legal net within which such properties can be defined,” Limaye said.
“This means a lot more cases of benami properties, which would previously have been dismissed because the laws were vague, can now be proved in court. This bill will result in more such properties being confiscated.”
The new bill will plug loopholes in the existing law. It will contain elaborate provisions dealing with the definition of benami transactions and property, prohibited benami transactions, consequences of entering into a prohibited benami transaction and the procedure for implementing the benami law.
Niranjan Hirandani, co-founder and MD, Hiranandani Group, said,
“I will have to read through the details of the bill to understand its implications. However, the cabinet's decision is a move in the right direction. It will curb a lot of unscrupulous deals and bring more clarity in land deals.”
Industry experts say the real-estate markets in Delhi, Mumbai and Ahmedabad see the most benami deals. Typically, in land, about 50% deals are benami, while in constructed premises, 20% are benami.
Ashish Purvanakara, joint managing director, Purvanakara Group, said, “This will add value to the A-class developers as it will keep speculators away from the market. Transactions mostly in the northern and western regions would be affected more.”
Others are not so confident about the new bill. “I do not expect much change,” said one developer who did not want to be named.“This could be just an attempt to save face in the wake of the recent scams.”
Santosh Naik, managing director, Disha Direct, said, “While laws may be in place they have to be executed well. The question is, who will implement this and how.”
Anand Narayan, director, residency, Knight Frank India, said the real-estate market had become a more transparent than it was a decade ago. “A lot of companies are now going public, hence not much benami transactions can be expected in the tier-I cities,” he said.
An industry analyst who did not wish to be named said, “Benami transactions are typically a source of funding for the small players. The money comes in while purchasing a land parcel and at the early stages of construction. Typically, a investor provides this initial funding and the builder blocks a couple of flats against this investment.
“Later, when end-users come in and there isn’t much inventory left these flats are sold. They are typically held in no particular name.”
Properties held by a coparcener in a Hindu undivided family and property held by a person in a fiduciary capacity are excluded from the definition of benami transaction. Further, properties acquired by an individual in the name of the spouse, brother, sister or any lineal ascendant or descendant are benami transactions that are not prohibited.
The bill will confer the powers of a civil court on authorities implementing its provisions. Confiscated property may be vested in the central government.
Anyone who induces another to enter into a benami transaction could face imprisonment for not less than six months and up to two years and also a fine.
–Inputs from Ashutosh Kumar
