Trust Law: India Fighting Against Illicit Financial Flows and Real Estate

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Real estate is often the choice conduit for money launderers to transfer money, primarily because it can be difficult to misprice, but also because of the way some countries write their laws.

India, in its ongoing fight against illicit financial flows, is now struggling to clamp down on shady real estate deals. From Trust Law:

Ulwe, a village of dusty, uneven streets on the outskirts of Mumbai, lacks basic amenities like water supply and electricity, but a two-bedroom, 1,000 sq ft house costs about 5 million rupees ($91,000), beyond the reach of many middle-class Indians.

According to prospective buyers, many developers will demand up to 30 percent of that price in cash, a small slice of the ubiquitous, unaccounted “black money” that costs India’s straitened exchequer billions of dollars in lost taxable income.

Legislation that would bring more transparency to the industry will be considered during the winter session of India’s parliament, which starts on Thursday.

However, investors, tax officials and bankers Reuters spoke with were sceptical the law would stamp out illegal practices they say are closely entwined with politics.

“Four out of 10 developers were ready to do it in full white and six were asking for a black component,” said 35-year-old Umesh Kolhapure, who was looking for a three-bedroom house around Ulwe, near the proposed site of a new international airport serving the country’s financial capital.

You can read the full analysis here.