26% of Homebuyers Made Partial Cash Payments in Last 3 Years: LocalCircles Survey

Despite government initiatives to link Aadhaar with property records, promote transparency through digital payments, and streamline processes, black money continues to fuel the real estate sector. Countering government policies, the process of buying and selling property remains affected by bureaucratic hurdles and high transaction taxes.

A recent discussion on the LocalCircles platform involved someone sharing that her friend asked her to give ₹2 lakh in cash for a property purchase. The friend admitted she had asked multiple family members and friends for similar help because she needed to pay part of the transaction in black money. This incident raises questions about why salaried individuals must convert their tax-paid or legal income into black money to buy property.

“Up to 50% of high-value property deals involve unreported cash, evading taxes and inflating prices,” states Dr Rakesh Verma, a former bureaucrat, in a policy paper titled “Addressing Inflated Real Estate Prices in India – Tackling Corruption, IAS Involvement, and the Role of Big 4 False Reports,” published on LinkedIn. Verma explains that regulatory inefficiencies, such as the requirement for 40–70 approvals, create bottlenecks, thereby fostering corruption and increasing costs, which are passed on to buyers.

The Indian real estate market experienced a notable rise in land transactions during the first half of 2025, totalling ₹30,885 crore, according to ANAROCK Property Consultants. Higher numbers of outright purchases and joint development agreements drive this increase. Anarock reports that while the market has seen a reduction in the use of black money in housing deals since demonetization, with a decrease of 75-80%, it's still a factor in smaller towns and peri-urban areas.

Other studies and shared experiences of buyers in the cities show that black money constitutes a major part of most property deals, especially in plots, resale transactions, and when circle rates remain low compared to actual prices. Therefore, it is common for buyers or sellers to finalise property transactions “off the books” in cash to avoid taxation, effectively creating black money. For example, a property officially registered for ₹70 lakh might have a total transaction value of ₹1 crore, with ₹30 lakh paid in cash. While the local authorities have set circle rates (minimum property values for registration) based on location, infrastructure, and facilities available, the actual market rates are often much higher, creating opportunities for corruption to bridge the gap, per the report.

Over the past three years, the number of survey operations conducted by the Income Tax Department has decreased. However, the average amount of undisclosed income identified per survey has risen sharply, indicating a more targeted and intelligence-driven strategy by the I-T department, according to Minister of State for Finance Pankaj Chaudhary, who informed the Rajya Sabha in August. During the 2024–25 financial year, the Income Tax (I-T) Department detected ₹30,444 crore in undisclosed income (black money) through 465 survey operations, Chaudhary informed the Rajya Sabha in a written reply.

In 2023-24, the IT Department conducted 737 survey operations, resulting in the detection of ₹37,622 crore in undisclosed income. In 2022-23, during 1,245 survey operations, an undisclosed income of ₹9,805 crore was detected. Besides black money, all operations yielded significant assets. Through a new study, LocalCircles has aimed to determine if there has been any change in the use of black money in real estate over the past three years. The survey collected over 39,000 responses from citizens across 301 districts of India. 68% of respondents were men, while 32% were women. 44% of respondents were from tier 1, 26% from tier 2, and 30% from tier 3, 4, 5, and rural districts.

The survey first asked, “If you or your family bought a property (land, house, flat, shop, office, others) in the last 3 years, on average, what percentage of the value had to be paid in cash?” Of the 20,144 respondents to this question, 26% stated they had paid “over 50%” in cash; 19% said they had paid “30-50%”; 14% reported paying “10-30%”; 7% indicated they had paid “0-10%”; and only 34% said they had paid “none” in cash. Essentially, 2 in 3 of those who bought property in the last 3 years paid a part of the price in cash, with 26% paying over half in cash.

The survey findings show how still prevalent the use of cash is in property transactions. While the use of cash may have decreased in the purchase of flats from a builder in a metro, it remains common in land, plot transactions, or dealings involving old family properties. Whenever someone looks for a property, an early conversation between buyer and seller often revolves around agreeing on the kachha-pakka or black-white ratio for the transaction.