The Ministry of Finance is likely to issue a notification to bring property dealers under the ambit of the Prevention of Money Laundering Act (PMLA) by the end of this year.
Preparations to bring property dealers under the purview of the PMLA have been expedited and recently, a meeting in this regard was held in the Ministry of Finance.
Officials of the Financial Intelligence Unit (FIU) and directors of the Enforcement Directorate (ED) were present in the meeting, sources in the ED said.
The ministry has been preparing the necessary legal framework for bringing property dealers under the purview of PMLA, the sources said.
The proposal to bring property dealers under the PMLA came last year, after a detailed study carried out by the National Institute of Public Finance and Policy (NIPFP).
The NIPFP had found that the estimated black money generation in real estate in the country at the time of demonetisation last year was around Rs 5.7 lakh crore.
The NIPFP was roped in for a study on the use of black money in the real estate sector around the demonetisation period last year.
“The Central government has already brought in the Real Estate (Regulation and Development) Act (RERA) to deal with irregularities in the real estate sector, but the massive use of black money in the sale and purchase of properties has forced the government to bring such deals under the ambit of the PMLA. Also, the government will introduce a new definition for property dealers,” a senior government official confirmed.
The NIPFP study report had proposed a four-point action plan, which included expansion of the definition of capital assets to include transfer of farm land outside eight km of a municipal limit.
According to the NIPFP study report, real estate agents largely depend on the informal credit market to meet their financial requirements.
“Property dealers have been playing a key role in deciding the volume of the use of black money in real estate deals. After the mandate from the Ministry of Finance, the ED will be given a free hand to confiscate properties involving illegal transactions of money,” the same official cited above told The Sunday Guardian.
The government’s move to bring property dealers under the purview of PMLA is being described by real estate experts as a “positive step” which will help prevent the massive use of black money in the property market and curb sky-rocketing prices.