Kathmandu: National Consumer Forum, a group dedicated to upholding consumer rights, has drawn the attention of Prime Minister KP Sharma Oli towards suspicious transactions in the real estate sector.
The Kathmandu-based group has indicated massive money laundering and rampant tax evasion in the real estate business.
“While it is the responsibility of the state to ensure the right to property of citizens, the state is equally responsible for bringing the culprits involved in money laundering and tax evasion to the book,” reads the statement by the group.
The consumer group has raised the question of legitimate income to establish suspicious transactions in the real estate sector. “Not only the government is well familiar with the salary scale of ministers, members of parliament (MPs) and bureaucrats, but also the formal income declaration of business communities,” says the statement. How could these people afford real estate property worth millions or billions in a country where their pay scale (legitimate income) is way too low compared to their investment in the properties, questioned the group, indicating the ‘unusual possession’ of assets.
In one of the world’s poorest countries, the price of real estate is higher than that in developed cities of the United States of America, the group states. “Where does the money come from? Who are buying properties, and what are their legitimate sources of income to spend millions and billions?” asks the forum through the statement.
Similarly, the forum has indicated the possibility of investment by land mafias to launder the money.
Further, the forum has also brought to attention the rampant tax evasion in the transaction of properties through under-valuation. The responsible government agencies could have easily investigated the tax evasion had they done thorough monitoring of the issue. “Properties are advertised quoting the price in billions, but in most cases, the actual valuations in the land revenue offices appear insignificant compared to the advertised price,” the forum said.
How could these people afford real estate property worth millions or billions in a country where their pay scale (legitimate income) is way too low compared to their investment in the properties, questioned the group, indicating the ‘unusual possession’ of assets.
It has been an open secret that real estate agents receive up to five percent, or even more, in each transaction, the forum said. “Why is the state reluctant to bring these real estate agents (Jagga dalals) to the tax net in a country where even a low-ranked employee should pay tax? Is this a clear message that the state protects these agents?” questioned the forum. The forum has demanded to investigate the income of the past 10 years of all real estate agents and bring them to the tax net.
The forum has also indicated the problem with banks and financial institutions (BFIs) in obscuring the possible money laundering and tax evasion. BFIs, the backbone of the formal economy, are also releasing loan amounts to real estate properties through informal valuation. “Banks and financial institutions should approve loans as per the actual valuation at the Land Revenue Offices. This will help the government monitor real estate business effectively and track the legitimate income of buyers,” further says the statement. The forum has demanded immediate action if any officials at Revenue Offices are involved in decreasing property value.
According to Prem Lal Maharjan, President of the forum, the real estate market’s irregularities clearly prove that money from illegal sources and corruption is injected into the market. “There has been an artificial hike in the price of real estate, developing the overall sector as a hub of money laundering,” he added.
“When even the poor are obliged to pay the taxes, how long will these agents running the business without any scrutiny get protection?” asked the forum, demanding immediate investigation and action.
The group has shown concerns over the fact that that the actual consumers are affected by the overvaluation, undervaluation and artificial transaction of properties to launder money by a handful of agents. The situation is not in favor of real buyers, and the government must act now to safeguard the principle of fair business, said Maharjan.