PMLA

PMLA in Real Estate

A Buyer, Developer and Channel Partner Perspective

Creating Transparency, Trust and Responsible Property Transactions

Real estate is one of India's most important investment sectors. A property transaction typically involves substantial financial commitments and multiple stakeholders — the property buyer, developer, channel partner, banks and financial institutions, legal and professional advisors and other transaction participants.

With large-value transactions and multiple parties involved, maintaining transparency in the flow of funds, identifying the parties involved and maintaining proper documentation are important aspects of responsible real-estate transactions.

The Prevention of Money Laundering Act, 2002 (PMLA) forms an important part of India's legal framework for combating money laundering. Applicable reporting entities have obligations relating to customer identification, beneficial ownership, record keeping and furnishing prescribed information to the Financial Intelligence Unit-India (FIU-IND).

For a property transaction, PMLA compliance can therefore be viewed from three perspectives:

• The Buyer — providing accurate information and maintaining a transparent source and trail of funds.
• The Developer — maintaining appropriate customer and transaction processes.
• The Channel Partner — facilitating the transaction responsibly and supporting appropriate compliance processes.

1. Why Does PMLA Matter to a Property Buyer?

A buyer may be asked to provide KYC documents, PAN, identity information, address details, information regarding the transaction and, where applicable, information relating to the source of funds.

These requirements form part of the broader customer due-diligence framework applicable to reporting entities. FIU-IND states that reporting entities are required to identify clients, verify their identity and, where applicable, identify and verify beneficial owners.

For a genuine buyer, this should be seen as an important part of maintaining a transparent property transaction.

The buyer should be able to establish:

• Who is purchasing the property?
• Who is making the payment?
• Where appropriate, who ultimately owns or controls the purchasing entity?
• What is the legitimate source of funds?
• Is the transaction properly documented?

2. KYC — Know Your Customer

A buyer may be required to provide appropriate identity and address documentation, PAN and other information depending on the nature of the transaction and applicable requirements.

Where a buyer is purchasing through a company, LLP, trust or other legal entity, additional information concerning the entity and its ownership/control structure may be required.

FIU-IND's guidance identifies different documentation requirements for individuals, companies, partnership firms, trusts and other entities.

3. Source of Funds

A property purchase can involve a substantial amount of money. A buyer should therefore maintain appropriate documentation establishing the legitimate source of funds used for the transaction, wherever such information is required.

Funds may originate from:

• Salary or business income
• Savings
• Home loan
• Sale of another property
• Investment redemption
• Inheritance
• Legitimate gifts
• Other legitimate financial sources

Under the PMLA framework, enhanced due diligence can include examination of ownership, financial position and sources of funds in specified circumstances.

4. Use Transparent Payment Channels

A buyer should preferably make property-related payments through legitimate and traceable banking channels.

The buyer should:

• ✓ Maintain bank/payment records.
• ✓ Obtain proper receipts.
• ✓ Ensure payment details correspond with the transaction documents.
• ✓ Avoid undocumented payment arrangements.
• ✓ Clarify third-party payment arrangements before making or accepting such payments.

5. Third-Party Payments

If someone other than the purchaser proposes to make a payment towards the property, the arrangement should be properly explained and documented.

The buyer should understand:

• Who is making the payment?
• What is the relationship with the buyer?
• Why is the third party making the payment?
• Is the arrangement permitted and appropriately documented?

Unexplained third-party transactions may require additional clarification or due diligence.

6. The Developer's Role in a Transparent Property Transaction

A developer is responsible for selling and delivering the property in accordance with applicable laws, contractual commitments and its internal processes.

From a compliance perspective, an applicable reporting entity must undertake the customer due diligence and record-keeping obligations prescribed under the PMLA framework.

A professional developer's compliance framework may include:

• Customer identification
• KYC verification
• Beneficial ownership verification, where applicable
• Transaction documentation
• Payment monitoring
• Appropriate record keeping
• Risk-based due diligence
• Internal escalation procedures
• Regulatory reporting where legally required

7. Developer and Buyer — Maintaining a Clear Transaction Trail

The developer and buyer should work towards maintaining consistency between:

• Booking details
• Agreement for Sale
• Payment schedule
• Banking/payment records
• KYC details
• Possession and other transaction documents

Maintaining consistency across these records can help establish a clear transaction history.

8. Developer's Role in Customer Due Diligence

Where PMLA obligations apply, the developer/reporting entity should undertake appropriate customer due diligence in accordance with the applicable legal framework.

This may include establishing:

• Identity of the customer
• Address and relevant identification details
• Purpose and intended nature of the relationship, where applicable
• Beneficial ownership
• Authorisation of persons acting on behalf of an entity
• Relevant financial information where required

FIU-IND states that reporting entities are expected to conduct ongoing due diligence and examine transactions for consistency with their knowledge of the client, business and risk profile, including source of funds where necessary.

9. Developer's Responsibility for Records

Appropriate record keeping is a fundamental part of PMLA compliance.

Section 12 requires reporting entities to maintain records enabling individual transactions to be reconstructed and to maintain documents evidencing client and beneficial-owner identity, account files and business correspondence.

FIU-IND states that relevant records generally have prescribed five-year retention periods, subject to the applicable statutory provisions.

For a developer, an organised documentation system can therefore provide an important audit trail.

10. The Channel Partner's Role

A channel partner acts as an important link between the property buyer and developer.

The channel partner may assist the buyer with:

• Project information
• Property selection
• Booking process
• Documentation coordination
• Communication with the developer
• Payment-process coordination
• Transaction-related assistance

Where the channel partner falls within the applicable PMLA framework, it must comply with the obligations applicable to its status and activities.

The Government's 2020 notification specifically covered real-estate agents providing services in relation to sale or purchase of real estate and having annual turnover of ₹20 lakh or above as persons carrying on designated business or profession.

11. KYC and Customer Information

A channel partner should encourage customers to provide accurate and genuine information whenever documentation is required as part of the applicable compliance process.

This can include:

• Identity information
• PAN
• Address details
• Entity information
• Authorisation documents
• Beneficial ownership information, where applicable
• Relevant transaction information

The channel partner should also avoid facilitating transactions based on incomplete, misleading or unexplained information.

12. The Channel Partner as a Responsible Facilitator

The role of a channel partner is not simply to generate a property sale.

A professional channel partner should help facilitate a transaction in which:

• The customer is properly identified.
• The property transaction is properly documented.
• Payments follow legitimate processes.
• Relevant information is communicated accurately.
• Unusual circumstances are appropriately escalated.
• Customer information is handled responsibly.

13. Identifying Potential Red Flags

A channel partner may come across circumstances that require additional clarification.

Examples may include:

• Unexplained third-party payments
• Inconsistent customer information
• Unusual payment structures
• Significant unexplained changes in the purchaser
• Complex transaction structures without an apparent commercial rationale
• Unexplained source of funds
• Attempts to bypass normal documentation procedures

However: A red flag does not automatically mean that a transaction is illegal. It may simply indicate that additional information, due diligence or internal escalation is appropriate.

PMLA and the related framework provide for enhanced due diligence and ongoing monitoring in relevant circumstances.

14. Buyer + Developer + Channel Partner

A successful property transaction requires coordination between all three stakeholders.

Buyer	Developer	Channel Partner
Provides accurate KYC	Maintains appropriate KYC process	Coordinates documentation
Maintains source-of-funds records	Maintains transaction records	Supports transparent transaction process
Uses legitimate payment channels	Monitors payments as applicable	Encourages legitimate payment channels
Discloses relevant ownership information	Verifies beneficial ownership where applicable	Collects/coordinates required information
Maintains property documents	Maintains customer records	Maintains applicable records
Clarifies third-party payments	Examines unusual transactions where required	Escalates unusual circumstances appropriately
Cooperates with due diligence	Follows applicable regulatory requirements	Follows applicable regulatory requirements

15. What Each Stakeholder Should Remember

FOR THE BUYER

Be transparent about your identity and transaction. Provide accurate documentation, maintain a clear source and trail of funds and use legitimate payment channels.

FOR THE DEVELOPER

Build compliance into the property-selling process. Maintain appropriate KYC, due diligence, transaction records and internal controls applicable to your business and legal obligations.

FOR THE CHANNEL PARTNER

Facilitate the transaction responsibly. Help customers understand documentation requirements, coordinate with the developer and avoid facilitating unexplained or non-transparent transaction arrangements.

16. Compliance Is a Shared Responsibility

PMLA compliance should not be viewed as an obstacle to buying property. Instead, it can be viewed as part of a broader system designed to promote transparency and accountability in financial transactions.

For the buyer, it means: "My transaction is properly documented."

For the developer: "My customer and transaction records are appropriately maintained."

For the channel partner: "I am facilitating the transaction responsibly."

Together, these create:

Transparency → Documentation → Accountability → Trust

17. A Practical PMLA Checklist

PROPERTY BUYER

• Complete KYC accurately.
• Provide genuine and updated documents.
• Maintain appropriate source-of-funds documentation.
• Use legitimate banking channels.
• Keep payment receipts.
• Clarify third-party payments.
• Maintain copies of property documents.
• Disclose relevant ownership information when purchasing through an entity.

DEVELOPER

• Maintain appropriate customer due diligence.
• Verify customer identity as required.
• Identify beneficial owners where applicable.
• Maintain transaction and customer records.
• Maintain appropriate internal compliance procedures.
• Monitor relevant transactions based on applicable risk requirements.
• Escalate/report matters where legally required.

CHANNEL PARTNER

• Follow applicable PMLA requirements.
• Obtain/coordinate required customer information.
• Avoid incomplete or unexplained transaction arrangements.
• Encourage legitimate payment channels.
• Maintain applicable records.
• Protect customer information.
• Escalate unusual circumstances appropriately.

18. Our Commitment as a Channel Partner

As a professional real-estate channel partner, we believe that our responsibility extends beyond connecting a buyer with a developer.

Our objective is to facilitate a property-buying experience based on:

• Transparency: Clear and accurate communication.
• Documentation: Proper transaction records.
• Compliance: Respect for applicable legal and regulatory requirements.
• Professionalism: Structured and responsible transaction facilitation.
• Trust: Putting transparency at the centre of the customer relationship.

We believe that when buyers, developers and channel partners work together within a transparent framework, the entire real-estate ecosystem benefits.

19. Our Three-Stakeholder Promise

20. The Real Meaning of PMLA in Real Estate

PMLA should not be understood merely as a compliance requirement. For the property ecosystem, it represents an important principle:

For a buyer, developer and channel partner, the goal is ultimately aligned: A property transaction that is transparent, properly documented and responsibly facilitated.

Because in real estate, the strongest transactions are built not only on the right property, but also on the right process.

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