What is the Prevention of Money Laundering Act in real estate?
The Prevention of Money Laundering Act, 2002 (PMLA) is a central legislation that criminalises the generation and laundering of proceeds from specified criminal activities including tax evasion, corruption, and drug trafficking — through real estate and other channels.
How Real Estate Is Used for Money Laundering
- Purchasing property with unaccounted cash then selling at market value to 'clean' the money.
- Circular transactions buying and selling between related parties at inflated prices.
- Over-invoicing or under-invoicing construction costs to siphon funds.
PMLA Obligations for Real Estate
- Developers: Must register as 'reporting entities' under PMLA; KYC of buyers; report suspicious transactions to FIU (Financial Intelligence Unit).
- Banks/HFCs: Must verify property transaction source of funds.
- Buyers/Sellers: Cannot accept or pay consideration in cash above ₹20,000 per transaction (Section 269SS).
PMLA compliance is now a core element of responsible real estate practice requiring developers, agents, and financial institutions to conduct KYC, document fund sources, and report suspicious activity. Buyers and sellers must ensure all property transactions are fully documented, traceable, and consistent with disclosed income.
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