India: ML through trade, now real estate

It looks like India is trying to catch up with the rest of the world on money laundering methods. Last week we saw the emergence of news stories linking trade to money laundering; the anti-money laundering (AML) sector globally and International Chamber of Commerce have been talking about trade based money laundering for years, so much so that the phrase is now abbreviated to TBML.

This week, we read news that the Indian Enforcement Directorate has come around to the idea that construction projects are also a great way to launder and hide the proceeds of crime from prying eyes. A headline in the Financial Express drew attention to the massive potential for laundering cash through the real estate sector in India.

DDA flats next to a slum, New Delhi

DDA flats next to a slum, New Delhi

Public construction works take years to complete in India, as seen prior to the Commonwealth Games 2010, when unfinished projects were hidden behind temporary hoardings as the money to complete them had mysteriously dried up. Some of the temporary hoarding was still there when I left in 2012. A project to concrete over an  open storm drain-cum-open sewer which runs through Defence Colony, one of South Delhi’s fanciest neighbourhoods, was started in the mid 2000s. By 2012, it was still under construction. I saw a group of 20 or so workers at any one time hanging around or working on the project. Most of them lived under blue tarpaulin sheets strung from fences bordering the drain.

But life in India is not always thus for the wealthier residents. Buying property in the political capital – New Delhi – and financial centre – Bombay – is a privilege that only the wealthy can afford. In Delhi, the city government started to build blocks of affordable housing through the Delhi Development Authority (DDA) in the mid 1960s and many middle class families live in these apartments. The DDA plans to launch a new housing scheme in 2014.

Other housing options, New Delhi

Other housing options, New Delhi

Private housing prices are, pardon the pun, through the roof with many transactions being made privately, directly between buyer and seller. Property is often bought for cash which is not banked. Architects are regularly asked to build false walls into properties for hiding cash at home. Building regulations, illegal construction and legal disputes often mean housing stands empty, while the courts process the cases which often take years to settle. A lot of real estate is also built on disputed land in India. In New Delhi, some of the cities most salubrious and extravagant properties are in fact built on disputed land, which will never be challenged as the residents have enough power to ensure it will never be investigated.


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