Prime Minister KP Sharma Oli has been alerted to dubious transactions in the real estate industry by the National Consumer Forum, a body dedicated to protecting consumer rights.
The Kathmandu-based organisation claims that the real estate industry is rife with significant money laundering and tax fraud.
“While it is the state’s role to protect people’ right to property, it is also the state’s responsibility to prosecute those implicated in money laundering and tax evasion,” the group’s statement adds.
The consumer group has brought up the issue of legitimate income in order to uncover shady real estate purchases. “Not only is the government well-versed in the pay scales of ministers, members of parliament (MPs), and bureaucrats, but it is also well-versed in the formal income declarations of business communities,” according to the statement. How could these people afford real estate worth millions or billions in a country where their pay scale is way too low compared to their genuine income, the group wondered, pointing to the ‘abnormal possession’ of assets.
The price of real estate in one of the world’s poorest countries is higher than in developed cities in the United States of America, according to the organisation. “Where does the money come from?” says the narrator. Who are the people buying houses, and what are their legitimate sources of income to spend millions and billions?” the forum questions in a statement.
Similarly, the forum has mentioned the likelihood of land mafias investing in order to launder money.
Furthermore, the forum has raised awareness of widespread tax fraud in property transactions through undervaluation. If the competent government agencies had kept a close eye on the situation, they could have easily probed the tax evasion. “Properties are promoted with a price in billions, but in most cases, the actual valuations in the land revenue offices appear minor in comparison to the advertised price,” according to the forum.
How could these people afford real estate worth millions or billions in a country where their pay scale (legal income) is far below their investment in the properties, questioned the group, demonstrating the ‘abnormal ownership’ of assets?
According to the site, it has long been known that real estate agents take up to 5%, if not more, of each sale. “Why is the government so hesitant to put these real estate brokers (Jagga dalals) into the tax net in a country where even the lowest-paid employee is required to pay tax?” Is this a clear message from the state that these agents are safe?” the forum wondered. The forum has ordered that all real estate agents’ revenue from the previous ten years be investigated and brought within the tax net.
The meeting also brought up the issue of banks and financial institutions (BFIs) obfuscating potential money laundering and tax evasion. BFIs, the backbone of the formal economy, are also using informal valuation to release loan amounts to real estate properties. “Banks and financial institutions should approve loans based on the Land Revenue Offices’ true appraisal. The government will be able to efficiently supervise the real estate business and track the genuine income of buyers as a result of this, according to the statement. If any officers from the Revenue Offices are implicated in lowering property values, the forum has requested swift action.
The inconsistencies in the real estate market, according to Prem Lal Maharjan, the forum’s President, plainly demonstrate that money from unlawful sources and corruption is poured into the market. “There has been an artificial increase in real estate prices, resulting in the broader industry being a money laundering hub,” he continued.
“How long will these agents running the company without any inspection get protection when even the poor are required to pay taxes?” queried the forum, demanding an inquiry and action right away.
The group is concerned that real customers are being harmed by the overvaluation, undervaluation, and artificial transaction of properties by a few agents in order to launder money. The scenario is not favorable to genuine buyers, and the government must act quickly to protect the idea of fair trade, according to Maharjan.