Explained: What Is 'Black Money' And How It Affects The Real Estate Market

Unaccounted earnings for which taxes have not been paid to the authorities are popularly known as black money. Money earned through illegal channels is also termed as black money. Such funds are hoarded as cash and paid in the same way so that there is no official record of the proceedings. Real Estate Transactions are one of such channels where Black Money is used in bulk. 

Not only does the use of unaccounted money harm a country's overall economy but also rips it off transparency, leading to corruption in the system. For instance, the government of India loses thousands of crore rupees every year in its revenue earnings owing to the circulation of black money into the economy; the impact is more prominently seen in the real estate sector. Being a capital-intensive sector, the component of black money in real estate sector is tremendously high. It is a favourite asset class for money hoarders to park their money.

In a major step to curb the black money menace, Prime Minister Narendra Modi on November 8 said his government would withdraw the existing notes of Rs 500 and Rs 1,000 denominations and replace them with fresh notes. The move is likely to clean the system of unaccounted money in an effective manner.

Also read: Govt Demonitises Rs 500 and Rs 1,000 Notes; Move Will Cure Realty Of Many Ailments In Long Term