Surv. J. Zinzi Ayitey Senior Lecturer, KNUST; FGhIS a Facilitator of the Public Private Dialogue Platform at a Key Stakeholders Workshop organized by the Ghana Chamber of Construction Industry under the auspices of the Ministry of Works and Housing funded by BUSAC FUND and its donor partners DANIDA and USAIAD, present a well detailed paper on the Real Estate Agency Bill which is currently in Parliament and has gone through the second reading awaiting its passage into an act before the end of this current parliament.
The purpose of the Bill is to regulate real estate agency practice, the conduct of real estate agency practitioners, commercial transactions in real estate including the sale, purchase, rental and leasing of real estate, as well as other real estate transactions.
The real estate sector is of great importance to the economy of every country and particularly to the financial market because of the large monetary transaction involved. Ghana, like all other economies, has had the practice of real estate agency in existence for a considerable length of time. The practice has grown considerably in recent years as the property market has become more active with the buying, selling, and leasing of property as an asset class and also for occupation.
The role of the real estate broker has traditionally been as an intermediary between the purchaser and vendor of property. One result of the increase in activities in the property market has been the influx of persons who have introduced fraud into the trade. Many real estate brokers and agents do not have any particular training in real estate agency and many others have no identifiable office accommodation. Investors in property who deal with real estate brokers have no guarantee against fraud and many have been swindled.
Furthermore, a glance at the real estate business shows the lack of appropriate internal control mechanisms, policies, training and audit systems among other things which make the sector attractive to criminals. Real estate transactions by their nature involve huge sums of money and because of this, there is the need to ensure that real estate agency practitioners and parties to real estate transactions keep records of their transactions for tax purposes. The lack of record-keeping by most real estate practitioners and parties to real estate transactions fails to pay tax on the incomes earned from the transactions. This denies the Government the necessary income for developmental purposes.
Another downside to the current state of real estate agency practice is the promotion of unhealthy competition between legitimate and criminal businesses because investment in the real estate sector offers advantages for legitimate law-abiding individuals and businesses and criminals who abuse the system. The socio-economic impact is significant though not readily measurable.
There is therefore the need to regulate real estate agency services to rid the industry of fraud, laundering of illegal income, and tax evasion to minimise the effect of these vices on the national economy and enhance the international image of the country.
Additionally, Ghana, as a signatory to international conventions on corruption, including the African Union Convention on Preventing and Combatting Corruption and the United Nations Convention against Corruption, needs to adhere to international standards for the prevention of money laundering. Some studies have identified real estate transactions as an avenue to launder money. There are diverse ways in which money is laundered through the real estate sector including direct cash purchase of properties, use of fictitious names to purchase property, and the use of third parties or front men to purchase property.
Thus in the country’s quest to adhere to international best practices, the Bill seeks to plug the avenues in which real estate transactions are used to launder money including the prohibition of the use of cash for real estate transactions. This will ensure that there is a detailed tracking of transactions and the persons involved in the real estate transactions.
The passage of the Bill will go a long way to strengthen the anti-corruption initiatives in the country and curb money laundering and other financial malpractices in the sector. It will also be in the interest of good governance and will give the country an improved standing in subsequent assessments by the International Action Group against Money-Laundering in West Africa.
The overreaching effect of the Bill will be the sanitization of the entire real estate market and the protection of all participants and the enhancement of tax revenue for development.
By: Surv. J. Zinzi Ayitey
(Senior Lecturer, KNUST and FGhIS)