Disadvantages of Buying Property from Black Money
Introduction
The first thought or image that comes to mind when we hear the term "real estate" is property. However, if we consider the term 'real estate' in its most literal definition, it encompasses far more than just property. Real estate is a type of real property that consists of land and everything permanently tied to it, whether natural or artificial. In layman's terms, real estate refers to any land or improvements that are related to it. Real estate projects like Blue World City includes apartments, multi-family homes, and villas. Pakistan's real estate business is one of the country's largest, contributing significantly to the country's GDP.
We hear the term "black money" a lot in the news, whether it's in relation to politics or big business scams. Although there is no universal definition of black money, it may be broadly described as all cash obtained via criminal means. These are money that can't be used to calculate taxes.
Relation between black money and real estate
Various investigations and research have shown that there is some sort of relationship between the real estate market and black money. There are two main or fundamental reasons that black money is generated in the real estate markets: (a) low risks of being detected in the act of tax evasion, and if found, the penalty rate is likewise fairly low; and (b) strong returns on investment in properties.
We all know that tax evasion is a major contributor to the creation of black money, and because the value of the assets involved is unknown, tax evasion becomes simpler in the real estate market. There are several techniques and complexities involved in determining a property's accurate and fair value. Because the value of the property is undetermined, the brokerage or fee charged by the agent cannot be calculated, and as a result, many purchasers and brokers make large sums of money that are frequently unaccounted for.
Other methods by which sellers generate black money in the real estate market include overestimating the cost of manufacturing, which allows them to record lesser profits and therefore avoid paying large taxes and making use of the Rent Control Act to undervalue the property, among others.
Topline Marketing is one of the tops and leading real estate agencies in Islamabad, Pakistan. We strive to provide quality guidance, Consultancy, and services regarding real estate housing projects and property management. As our presence is globally but specifically we specialized in Pakistani Real Estate market. We deal with top housing projects like Blue World City, Mega City Gujar Khan, Nova City Islamabad etc. If we talk about Nova City Peshawar, It's one of the most demanding upcoming housing societies in Peshawar which is on Motorway M-1 and exactly located in Charsadda. More specifically, The site of Nova City Peshawar was carefully picked since it is near the famous Charsadda Interchange of Peshawar, on the M-1 Islamabad-Peshawar Motorway. The M-1 Islamabad-Peshawar Motorway is only a 5-minute drive away, making this residential complex conveniently accessible from Islamabad. We always prioritize our customer's satisfaction because our customers are our great asset. This quality makes us unique.
Cons
1) Difficulty getting your money back if the sale falls through or you decide to back out (You usually get your money back, but because there is no formal documentation of payment, the procedure is arduous and exhausting both physically and psychologically). This is why all such agreements are established with clients upfront.
2) You end up paying tax on that amount when you file your IT returns (since the property value reported by your real estate agent when registering the property to you is lower than your invested amount)
3) You end up paying tax on that amount when you file your IT returns. (Here's the money you thought you saved by providing black money.)
Conclusion
Black money has a variety of negative consequences for individuals, the economy, culture, infrastructure, and so on, leading to corruption and the formation of a parallel economy in Pakistan. It also has an impact on economic planning and resource mobilization, policy inconsistencies, deflation in the impact of the income distribution, unemployment, inflation, forcing fiscal policy system adjustments, budget deficits and debt traps resulting in transaction costs, leading to a high-cost economy amid low wages and increasing the supply of cash.
It also has microeconomic implications, such as political failures, low-income people being left at the mercy of the market, societal criminality, impact on national security, influence on work ethics, impact on export efficiency, and a decrease in public faith in the government.
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