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I've a theory but that is not backed by data. Land prices in India are dropping rapidly. Here how (my hypothesis): People for generations have thought that lan

I've a theory but that is not backed by data. Land prices in India are dropping rapidly. Here how (my hypothesis): People for generations have thought that land prices will always increase. It might have been true before Demonetization. But now it is almost impossible to do anything with cash (expect the purchase of land). So if anyone thinks of buying land for any residential, commercial or industrial purpose, they will not able to use their cash in building because there are subsidies available for those who take loans to finance such building. So people will use loans (accounted money) to build their buildings. You cannot also buy cars with cash (unaccounted cash). Because of this, land purchases have either gone down or vanished (by unaccounted cash which was majority of the purchases). So the prices are rapidly falling as people decide on selling and don't find a buyer at the perceived market rate. So they lower the prices and the vicious downward cycle continues. Put simply: There was a land price bubble because of black money. Now the bubble is slowly bursting. IMO the bubble was so huge (as a % of the GDP), I think we're in serious trouble with the spillover effect of fallen property prices.

sbmthakur 7y ago
Not just the land but also Real Estate in big cities. A lot of Real Estate deals happened with significant cash percentage so that people could cheat with Stamp duty and Registration. At the same time, this also inflated the prices , thereby making them unaffordable to a large section of society.
- kylehotchkiss 7y ago
  American (who spends lots of time in India) here: what is stamp duty and registration? I see a lot of stamp paper and still don't really understand what it is
  - selimthegrim 7y ago
    Pakistani-American here - land transfers in subcontinent are carried out by first going to the local patwari (clerk) in charge of land revenue records. Stamp duty and and registration is charged after that on declared transfer price of the property, so cash portion is under the table and not subject to it https://joshandmakinternational.com/legal-procedure-pertaining-to-selling-property-in-pakistan-excluding-federal-territory/ https://joshandmakinternational.com/legal-procedure-pertaini... Source: family selling a house in Karachi
    - rohan_shah 7y ago
      So black money is equally prevalent in Pakistan also? Another sign of our strong bond, connection and brotherhood! xD
      - yogesch 7y ago
        Not Paki, but aware of their situation. It is not "equally" prevalent. It is at least an order of magnitude worse. Almost everything in Pak is about an order of magnitude worse than in India. Almost everything, except civic violence - that's about 2-3 orders of magnitude worse. The establishment has traditionally had other priorities. The current PM is trying to fix some things but faces tremendous pushback.
    - selimthegrim 7y ago
      As a note, that site is out of date for Punjab, in 2017 they combined a lot of taxes under stamp duty (not relevant to me obviously)
  - rohan_shah 7y ago
    When you buy a property, you have to register the property (on your name) with the local government body (generally the Municipal Corporation). The fee paid here is calculated as a percentage of the price paid for the land/property. So everyone buys (on paper) at exactly the ready reckoner rates (the minimum prices) and then pay the minimum taxes (or registration fees). While in reality the prices are way higher than the ready reckoner prices (generally 5 to 10 times) and so the rest of the price is paid in cash (unaccounted black money). If I may ask: Where in India so you like to spend your time in terms of urban/rural India? Have you found any life-threats just because you're a foreigner?
    - kranner 7y ago
      > While in reality the prices are way higher than the ready reckoner prices (generally 5 to 10 times) Sub-registrars often refuse to value the property at the ready reckoner price. I've seen transactions where the registered value was more than 60% of the actual value, though this is in an urban area.
  - sifar 7y ago
    Basically when you buy any property in India, you have to get your name as the owner in the historical record of the owners with the Land Registrar. This is the registration which is around 3-4% of the property value. The respective states also charge 2-3% for the sale.
    - pkaye 7y ago
      Do you have an yearly property tax also?
      - sifar 7y ago
        Yes, that you pay to the city.
  - yogesch 7y ago
    https://gharpedia.com/stamp-paper-judicial-non-judicial-stamp-paper/ https://gharpedia.com/stamp-paper-judicial-non-judicial-stam... https://en.wikipedia.org/wiki/Stamped_paper https://en.wikipedia.org/wiki/Stamped_paper Quote from wiki - "The use of stamped paper in the American colonies was so unpopular that it has been credited with sowing the seeds of the American Revolution"
  - ssivark 7y ago
    Suppose you wish to register ownership of a house/car/etc. The government might want to collect taxes at that point. Instead of asking that you remit money with the specific agency, you are asked to buy "govt authorized stamps" (from a central agency) worth the same amount and affix it to the registration documents as proof of payment.
  - csomar 7y ago
    Think about it as the weak government trick to collect taxes. Government is weak and can't enforce tax collection: i.e 99% of citizens will still not comply even if you are aggressive in auditing. So instead, they collect taxes where you can't escape them. Since you need to register land/house at the national registry (or similar), they require that you pay a tax before you can execute such a registration. Obviously, you can lie here but at least they are getting something out of it. Other tricks are taxes when you are leaving the country (buy a stamp so that you can board a plane), arbitrarily giving tickets on highways, super high taxes on telecommunication, cars and other stuff where you need to go through government, taxes collected by municipality go to the government instead, etc... It'd be interesting to study all countries and deduce that if a government is using these measures then it is a failed government.
    - aviraldg 7y ago
      > Other tricks are taxes when you are leaving the country (buy a stamp so that you can board a plane) What is this about? Genuinely curious. (Indian, and I haven't heard of this before.)
      - csomar 7y ago
        Basically you buy a stamp before being able to travel.
        ppmanik 7y ago
        You mean passport?
        csomar 7y ago
        No a stamp. A real stamp that you show to the immigration officer. And you have to buy a new one every time you travel.
        aviraldg 7y ago
sifar 7y ago
Long term real estate returns are roughly equivalent to bank fixed deposits. The higher returns are during periods of speculation in certain regions. While it is true that a lot of real estate transactions used to happen in cash, one of the major increase in housing prices was easy availability of credit. Banks would extend credit to both the developers and buyers. However the developers weren't required to repay the loans as they were extended, allowing them to sit on the inventory and keep increasing prices. While the cash crunch has contributed to decrease in RE prices, the banking/NBFC NPAs are also equally responsible. I find this vilification of cash naive and disingenuous. Naive for those who do not understand that many who deal in it earn too low to be taxed. Disingenuous for those who understand and still propagate this myth. Governments want to get rid of cash because it is a debt to them and they cannot easily confiscate it as they can money lying in a bank. Also cash provides a little safeguard against negative interest rates. Also transactions cannot be tracked or taxed. With digital transactions, the payment processors introduce a 1-2% tax on the economy.
- rohan_shah 7y ago
  I did not vilify cash in any way in my argument. I just stated my (little, unscientific) hypothetical analysis of the existing underlying situation. Ofcourse, getting rid of cash is very helpful to a "government" or "state" in collecting taxes, tracking as well as negative interest rates (even though I hope that is far away for India). But cash also helps get rid of corruption and any government which itself exists on the basis of black money will never do anything against black money which is what a factual analysis of the previous government will tell you. And the cash earners who earn too less to be taxed should be helped to get out of poverty which is only possible when they get a bank account and receive the money via direct benefit transfer which was meant for them instead of political goons. So it is no myth that the money Indian government was spending for the poor, never reached the poor and one of the reasons was because it was cash. And if we do not vilify corruption, I don't think any positive future is possible. *Not that the current government is white-washed and exists without black money, but the previous simply wasn't interested in solving the problem.
  - sifar 7y ago
kamaal 7y ago
>>There was a land price bubble because of black money. Now the bubble is slowly bursting. High value transactions were already tracked AND you can't register a property anywhere in a city without a PAN card. So enough with this depicting investors as cheats. There is no bubble because India is in the beginning of urbanization phases, and land rates are obviously high because the demand is way beyond the supply. So the prices being high is basically Econ 101. Instead of framing arguments this way, try understanding how some people are able to anticipate and buy lands years in advance, while some people can't even maintain discipline to invests in SIPs.
- gautamsomani 7y ago
  Just to make it clear, not all part of the deal used to happen via formal money exchanged. Some part of deal was transferred via bank/check and some part via cash. This was done to avoid tax on the whole deal amount. And I believe people will still try to do that.
- geodel 7y ago
  > High value transactions were already tracked AND you can't register a property anywhere in a city without a PAN card. I don't how you never experienced or know that this PAN card requirement is not much. A lot of land/home transaction involves large amount of unaccounted cash and this does not reflect on registered property price. Also if land price is 'obviously high' why rental yields are lowest in India compared to price of property. Who would really buy real estate if bank fixed deposits give better returns than rental income?
  - kamaal 7y ago
    >>I don't how you never experienced or know that this PAN card requirement is not much. You literally can't register a property in Bangalore without a PAN card. So please... AND the registrations are online. Everything is tracked. And in fact people themselves prefer its tracked because it prevents encroachment, double registrations etc. >>A lot of land/home transaction involves large amount of unaccounted cash and this does not reflect on registered property price. This was there long back. People keep repeating this, without any basis. The government can evaluate every single property and its evaluation traded as of at least 15 years now. >>Also if land price is 'obviously high' why rental yields are lowest in India compared to price of property. Because of several things. Firstly Land prices are high because individual people want them. Second when home units are built they are built several units over a single piece of land. Thirdly rental yields are also dependent on quality of construction, access to infrastructure, locality etc. >>Who would really buy real estate if bank fixed deposits give better returns than rental income? Simple reason. If you put money in fixed deposits inflation will eat the principle and you will eat the returns. Liquid money is easy to spend so it goes fast. Real estate is hard to dispose, so it stays and can be transferred over to the next generations. Plus land rates appreciate, and you get rental yield and you can use the deposit money to earn interest. Beyond this you get the advantage of owning a piece of real estate in prime locations as time passes. Stock investments require a lot of baby sitting and economic problems like these its hard for people to make decisions. Money once gone cannot be recovered easily. In case of real estate lands don't rot or vanish. Looking at it from multiple vantage points, Land ownership is by far the best investment you will make in a country like India.

sbmthakur 7y ago

Not just the land but also Real Estate in big cities. A lot of Real Estate deals happened with significant cash percentage so that people could cheat with Stamp duty and Registration. At the same time, this also inflated the prices , thereby making them unaffordable to a large section of society.

kylehotchkiss 7y ago
American (who spends lots of time in India) here: what is stamp duty and registration? I see a lot of stamp paper and still don't really understand what it is
- selimthegrim 7y ago
  Pakistani-American here - land transfers in subcontinent are carried out by first going to the local patwari (clerk) in charge of land revenue records. Stamp duty and and registration is charged after that on declared transfer price of the property, so cash portion is under the table and not subject to it https://joshandmakinternational.com/legal-procedure-pertaining-to-selling-property-in-pakistan-excluding-federal-territory/ https://joshandmakinternational.com/legal-procedure-pertaini... Source: family selling a house in Karachi
  - rohan_shah 7y ago
    So black money is equally prevalent in Pakistan also? Another sign of our strong bond, connection and brotherhood! xD
    - yogesch 7y ago
      Not Paki, but aware of their situation. It is not "equally" prevalent. It is at least an order of magnitude worse. Almost everything in Pak is about an order of magnitude worse than in India. Almost everything, except civic violence - that's about 2-3 orders of magnitude worse. The establishment has traditionally had other priorities. The current PM is trying to fix some things but faces tremendous pushback.
  - selimthegrim 7y ago
    As a note, that site is out of date for Punjab, in 2017 they combined a lot of taxes under stamp duty (not relevant to me obviously)
- rohan_shah 7y ago
  When you buy a property, you have to register the property (on your name) with the local government body (generally the Municipal Corporation). The fee paid here is calculated as a percentage of the price paid for the land/property. So everyone buys (on paper) at exactly the ready reckoner rates (the minimum prices) and then pay the minimum taxes (or registration fees). While in reality the prices are way higher than the ready reckoner prices (generally 5 to 10 times) and so the rest of the price is paid in cash (unaccounted black money). If I may ask: Where in India so you like to spend your time in terms of urban/rural India? Have you found any life-threats just because you're a foreigner?
  - kranner 7y ago
    > While in reality the prices are way higher than the ready reckoner prices (generally 5 to 10 times) Sub-registrars often refuse to value the property at the ready reckoner price. I've seen transactions where the registered value was more than 60% of the actual value, though this is in an urban area.
- sifar 7y ago
  Basically when you buy any property in India, you have to get your name as the owner in the historical record of the owners with the Land Registrar. This is the registration which is around 3-4% of the property value. The respective states also charge 2-3% for the sale.
  - pkaye 7y ago
    Do you have an yearly property tax also?
    - sifar 7y ago
      Yes, that you pay to the city.
- yogesch 7y ago
  https://gharpedia.com/stamp-paper-judicial-non-judicial-stamp-paper/ https://gharpedia.com/stamp-paper-judicial-non-judicial-stam... https://en.wikipedia.org/wiki/Stamped_paper https://en.wikipedia.org/wiki/Stamped_paper Quote from wiki - "The use of stamped paper in the American colonies was so unpopular that it has been credited with sowing the seeds of the American Revolution"
- ssivark 7y ago
  Suppose you wish to register ownership of a house/car/etc. The government might want to collect taxes at that point. Instead of asking that you remit money with the specific agency, you are asked to buy "govt authorized stamps" (from a central agency) worth the same amount and affix it to the registration documents as proof of payment.
- csomar 7y ago
  Think about it as the weak government trick to collect taxes. Government is weak and can't enforce tax collection: i.e 99% of citizens will still not comply even if you are aggressive in auditing. So instead, they collect taxes where you can't escape them. Since you need to register land/house at the national registry (or similar), they require that you pay a tax before you can execute such a registration. Obviously, you can lie here but at least they are getting something out of it. Other tricks are taxes when you are leaving the country (buy a stamp so that you can board a plane), arbitrarily giving tickets on highways, super high taxes on telecommunication, cars and other stuff where you need to go through government, taxes collected by municipality go to the government instead, etc... It'd be interesting to study all countries and deduce that if a government is using these measures then it is a failed government.
  - aviraldg 7y ago
    > Other tricks are taxes when you are leaving the country (buy a stamp so that you can board a plane) What is this about? Genuinely curious. (Indian, and I haven't heard of this before.)
    - csomar 7y ago
      Basically you buy a stamp before being able to travel.
      - ppmanik 7y ago
        You mean passport?
        csomar 7y ago
        No a stamp. A real stamp that you show to the immigration officer. And you have to buy a new one every time you travel.
        aviraldg 7y ago

sifar 7y ago

Long term real estate returns are roughly equivalent to bank fixed deposits. The higher returns are during periods of speculation in certain regions. While it is true that a lot of real estate transactions used to happen in cash, one of the major increase in housing prices was easy availability of credit. Banks would extend credit to both the developers and buyers. However the developers weren't required to repay the loans as they were extended, allowing them to sit on the inventory and keep increasing prices. While the cash crunch has contributed to decrease in RE prices, the banking/NBFC NPAs are also equally responsible. I find this vilification of cash naive and disingenuous. Naive for those who do not understand that many who deal in it earn too low to be taxed. Disingenuous for those who understand and still propagate this myth. Governments want to get rid of cash because it is a debt to them and they cannot easily confiscate it as they can money lying in a bank. Also cash provides a little safeguard against negative interest rates. Also transactions cannot be tracked or taxed. With digital transactions, the payment processors introduce a 1-2% tax on the economy.

rohan_shah 7y ago
I did not vilify cash in any way in my argument. I just stated my (little, unscientific) hypothetical analysis of the existing underlying situation. Ofcourse, getting rid of cash is very helpful to a "government" or "state" in collecting taxes, tracking as well as negative interest rates (even though I hope that is far away for India). But cash also helps get rid of corruption and any government which itself exists on the basis of black money will never do anything against black money which is what a factual analysis of the previous government will tell you. And the cash earners who earn too less to be taxed should be helped to get out of poverty which is only possible when they get a bank account and receive the money via direct benefit transfer which was meant for them instead of political goons. So it is no myth that the money Indian government was spending for the poor, never reached the poor and one of the reasons was because it was cash. And if we do not vilify corruption, I don't think any positive future is possible. *Not that the current government is white-washed and exists without black money, but the previous simply wasn't interested in solving the problem.
- sifar 7y ago

kamaal 7y ago

>>There was a land price bubble because of black money. Now the bubble is slowly bursting. High value transactions were already tracked AND you can't register a property anywhere in a city without a PAN card. So enough with this depicting investors as cheats. There is no bubble because India is in the beginning of urbanization phases, and land rates are obviously high because the demand is way beyond the supply. So the prices being high is basically Econ 101. Instead of framing arguments this way, try understanding how some people are able to anticipate and buy lands years in advance, while some people can't even maintain discipline to invests in SIPs.

gautamsomani 7y ago
Just to make it clear, not all part of the deal used to happen via formal money exchanged. Some part of deal was transferred via bank/check and some part via cash. This was done to avoid tax on the whole deal amount. And I believe people will still try to do that.
geodel 7y ago
> High value transactions were already tracked AND you can't register a property anywhere in a city without a PAN card. I don't how you never experienced or know that this PAN card requirement is not much. A lot of land/home transaction involves large amount of unaccounted cash and this does not reflect on registered property price. Also if land price is 'obviously high' why rental yields are lowest in India compared to price of property. Who would really buy real estate if bank fixed deposits give better returns than rental income?
- kamaal 7y ago
  >>I don't how you never experienced or know that this PAN card requirement is not much. You literally can't register a property in Bangalore without a PAN card. So please... AND the registrations are online. Everything is tracked. And in fact people themselves prefer its tracked because it prevents encroachment, double registrations etc. >>A lot of land/home transaction involves large amount of unaccounted cash and this does not reflect on registered property price. This was there long back. People keep repeating this, without any basis. The government can evaluate every single property and its evaluation traded as of at least 15 years now. >>Also if land price is 'obviously high' why rental yields are lowest in India compared to price of property. Because of several things. Firstly Land prices are high because individual people want them. Second when home units are built they are built several units over a single piece of land. Thirdly rental yields are also dependent on quality of construction, access to infrastructure, locality etc. >>Who would really buy real estate if bank fixed deposits give better returns than rental income? Simple reason. If you put money in fixed deposits inflation will eat the principle and you will eat the returns. Liquid money is easy to spend so it goes fast. Real estate is hard to dispose, so it stays and can be transferred over to the next generations. Plus land rates appreciate, and you get rental yield and you can use the deposit money to earn interest. Beyond this you get the advantage of owning a piece of real estate in prime locations as time passes. Stock investments require a lot of baby sitting and economic problems like these its hard for people to make decisions. Money once gone cannot be recovered easily. In case of real estate lands don't rot or vanish. Looking at it from multiple vantage points, Land ownership is by far the best investment you will make in a country like India.