The reporting process for realtors has been streamlined. In response to the National Coordination Committee’s (NCC) intervention on Financial Action Task Force (FATF) compliance, the Federal Board of Revenue (FBR) has defined clearly the reporting process for real estate sector participants, including realtors, brokers, developers, and builders who have recently registered as Designated Non-Financial Business and Professions (DNFBPs).
The reporting process has been simplified to assist over 22,000 registered DNFBPs in the real estate industry. However, they were having difficulty filling out a four-page datasheet, including more than four dozen inquiries concerning property sellers and purchasers. It was a critical stumbling block in completing the only remaining point on a 27-point action plan. By this weekend, the FATF would receive the new mechanism.
The NCC agreed to the demands on Aug 17 after a series of talks and reduced the reporting process to four practicable levels acceptable to DNFBPs. The FBR has now established the reporting and documentation requirements and the role and functions of these DNFBPs as a result of the decision.
Muhammad Ahsan Malik, Vice-President (Punjab) Federation of Realtors (FOR) and General-Secretary of the twin cities’ Real Estate Consultants Association (RECA), told the media on Monday that the director-general DNFBPs has instructed all relevant departments to deal with only registered DNFBPs. As a result, it will require over 500,000 realtors, developers, and other professionals to either register as DNFBPs or work under the auspices of already registered DNFBPs.
The mechanism should be updated and shared with the FATF
The law has not been updated to conform with FATF criteria. Still, relevant rules have been streamlined to eliminate redundant requirements for DNFBPs to exercise due diligence on behalf of their customers. The FBR portal would be updated to provide the required specifications for developers and builders registered as DNFBPs.
Now, registered developers, builders and realtors may easily adhere to the established laws and regulations. But, first, each developer and builder must verify the buyer’s and seller’s names against the United Nations’ list of 4,500 prohibited persons.
If the buyer or seller’s name is not on the list, there is no issue with transactions. However, suppose any of the names appear on the UN list. In that case, the developer and builder must immediately notify the authorities concerned using a mobile app, as directed by the director-general DNFBPs.
Second, the developer and builder would be required to retain copies of the sale and purchase agreement, as well as the purchasers’ and sellers’ CNICs.
Thirdly, due diligence on the consumer is also a necessity for builders and developers registered with the DNFBP. Additionally, the buyer and seller would file paperwork identifying the property’s valid beneficial owner. If someone purchases property on behalf of another must report the beneficial owner via a form to ensure a comprehensive money trail.
Fourth, the developer and builder are required to provide a Cash Transaction Report. At the moment, property dealers and developers are required to submit cash transaction reports for transactions exceeding Rs2 million. The majority of property transactions are conducted using FBR or DC rates.
Payment would be made via the purchaser’s bank account for the declared value of the FBR or DC rate of the property, as applicable. A money trail must accompany the purchase of the immovable property. Mr. Malik added that the developer and builder are also obligated by law to preserve documents for five years.
The questionnaires for developers/builders and jewelers are identical, and it can be challenging to demonstrate compliance with various laws, regulations, and legal requirements all at once. Therefore, HE NOTED THAT the DNFBP’s legal requirements should be met by the transferring/registration authorities/societies, namely the CDA, the LDA, the KDA, Bahria Town, DHAs, and revenue agencies. The FBR has registered 22,000 DNFBPs, or income tax return filers, out of the 500,000 property dealers operating throughout the country.
The directorate-general of DNFBPs would target non-filers in the real estate industry. The ultimate goal is to limit market activity to authorized dealers and developers. The developers’ and builders’ record-keeping procedures have been clarified and defined. Dealers now have a better understanding of the norms and regulations, he noted.
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