In the year to June 2012, about $6 billion, or 30 percent of total transactions in the property sector, were executed using black money, according to Liases Foras, a consultancy.
Real estate accounts for more than a 10th of India's $1.85 trillion economy.
The government says black money, a term widely used in India to describe undeclared funds, often meant to avoid taxes, can be present in every stage of a project from land acquisition to home sales.
For the purchase of a Rs 50 lakh home like those in Ulwe, a developer might typically ask for Rs 15 lakh in cash while making out a sales agreement for Rs 35 lakh.
With banks willing to lend up to 75-85 percent of the "official" sale price, the buyer will then need to fund anything from 45 to 60 percent of the total cost from savings, which is difficult for many salaried, middle-income househunters.
"It is unfair on the buyers," said Kolhapure, who has put his search on hold in the hope of a price correction that will help him afford a home for his family of five.