Blame red tape for black money

S. SHANKER

Innumerable approvals are breeding grounds for corruption.

Developers in Mumbai say single-window clearance could reduce apartment costs by a quarter.

Probably the first signs of introspection among them, developers saddled with high inventories and shrinking sales over the last 18 months called for reforms to end ‘licence raj.'

Developers have joined the crusade against black money and corruption and said the cost of apartments sold in Mumbai could easily be lower by 25 per cent. For this to happen, a single-window clearance needs to be put in place, instead of the 49 departments and over 150 persons that give approvals at present.

“Any delay at any stage obviously gives rise to greasing of palms as developers are anxious to complete their project,” said Mr Lalit Kumar Jain, National President, Confederation of Real Estate Developers' Association of India.

COST OF APPROVAL

A Mumbai developer said on average he pays Rs 3 crore a year for project approvals.

The Maharashtra Chamber of Housing Industry has over 1,000 members involved in developing projects worth over Rs 1 lakh crore in the city and its suburbs.

Mr Jain said that a McKinsey report to the Government of India on the cost of approval pointed out that the cost could constitute up to 40 per cent of the sale value.

Excessive regulation is the prime cause of project delays and innumerable approval/sanctions are fertile breeding grounds for corruption and black money transactions, he said.

Legalising black money

Does it serve the greater good?

The debate over allowing or disallowing of whitening of undisclosed sums of money is a strong one. The proposed provision for legalising moneys that is off the books envisages a payment of a flat penalty @10 percent. This facility of making black money white is likely to take effect in the next fiscal despite strong reservations of the various bodies representing the business community. The reasons for such opposition are obvious.

On the one hand the government is pressing ahead with widening the tax net and encouraging people and commercial entities to pay what is due to deepen the State's coffers; simultaneously it is extending the scope for legalising income generated illegally. The latest move is bound to send mixed signals to those who remain outside the tax brackets for it smells of double standards. Furthermore, how exactly does the government intend to legalise ill-gotten money when it is signatory to international anti-money laundering statutes remains to be seen. The fact that such undisclosed sums are commonly associated with corruption, crime or other illegal activities is not lost on anyone. More importantly, granting of such facility year after year encourages, even the otherwise honest tax payer to reconsider paying taxes. When one may 'whiten' one's money at a flat rate of 10 percent as opposed to the multi-layered tax slabs that exist under the tax laws, does it not make more sense to go with the latter?

Reforms needed to check corruption in real estate: CREDAI

Mumbai: The Confederation of Real Estate Developers' Association of India (CREDAI) on Tuesday said there was a need for comprehensive reforms to check black money and corruption in the realty sector.

"There is a need for all round reforms to end corruption and check black money in realty," CREDAI National President Lalit Kumar Jain told reporters here.

He said that CREDAI has been advocating for single window system for project clearances to cut down time and chance for corruption.

CREDAI has sought reforms in four key areas including administration, land, taxation and banking, which impact the real estate.

"There has been a lot of talk on this, but no action. We too hate the system that labels us as crooks and breeders of black money. There is a need to realise that the various bottlenecks at government level at Centre and in several states are equally responsible for this menace," he said.