Business papers in India publish various articles about the real estate and stock market bubbles in China but there is hardly a peep about the massive property price bubble in India. Since this government came into office last year it has been trying to tackle the problem of black money. A law to punish money stashed abroad was passed in May and the government is working on another law to punish black money in India. Many trillions of rupees of black money were generated from a plethora of scams between 2004 and 2014, during the Congress rule. The present government has stopped big corruption although petty corruption is still as rampant as before because state governments and municipalities are just as rotten. The Congress increased spending on social schemes by 5.4 times, that is from Rs 474 billion to Rs 2.54 trillion while total government expenditure increased by 3.15 times. Most of this money was stolen. The Deputy Chairman of the Planning Commission said in October 2009,"....a plan panel study on PDS (Public Distribution System) found that only 16 paise out of a rupee was reaching the targeted poor." Where did all this black money go? Into real estate where at least half the price of a property is paid in cash. A report by FICCI said," The real estate sector in India constitutes for about 11% of the GDP of Indian Economy, as these transactions involve high transaction value. In the year 2012-13, Real Estate sector has been considered the highest parking space for black money." To reduce theft the present government is paying subsidies directly into bank accounts of recipients and to facilitate that 169 million zero-balance bank accounts have been opened. A report by Mukherjee and Shekhar of Ambit said,"....at least 10% of the overall subsidies have already been moved to the DBT (Direct Benefit Transfer). As a result, the ability of the politician-builder to pilfer subsidies to fund real estate construction has been checked." Just a measly 10% and the result has been a pile up of unsold properties in Delhi and surrounding areas. At least 170,000 units remain unsold and another 90,000 units are delayed. To check illicit transactions the Supreme Court banned sale of properties on General Power of Attorney so people in Rohini, a suburb of Delhi, are building mud huts on land to convert them from leasehold to freehold, with suitable bribes to all concerned, so that they can sell them. State politicians, always greedy for more money to bribe voters with, have increased circle rates on which taxes are calculated. The Delhi government is thinking of taxing rents, based on circle rates, which will increase rents further and cause immense misery. Politicians commit crimes and we pay. A nice deal, what?
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