Baghdad- The Iraqi real estate market is witnessing widespread controversy after the Central Bank issued a decision to ban the sale of real estate whose value exceeds 100 million dinars ($76,000) except through banks.
Experts expect that this decision will lead to a decrease in demand for real estate and an increase in the cost of transactions, which may negatively affect the real estate sector.
Opinions were divided regarding the decision. While some see this decision as a positive step to combat corruption, others believe that it will lead to a freeze in the real estate market and increase the burdens on citizens.
The Central Bank earlier issued an official letter to the Real Estate Registration Department prohibiting the sale of real estate whose value exceeds 100 million dinars.
According to the new mechanism and instructions, real estate can only be sold through banks with the aim of reducing money laundering operations.
Clarification of “central”
In turn, Hussein Ali, Assistant Director of the Central Bank’s Anti-Money Laundering and Terrorist Financing Office, explained the reasons that prompted this decision to be taken, stressing that the decision did not come suddenly or randomly, but rather was the result of studies and experiences that extended for two full years.
Speaking to Al Jazeera Net, Ali stated that the Anti-Money Laundering and Terrorism Financing Council has developed a clear strategy since 2022, and the first decision taken was to set a ceiling for real estate sales made through banks at a value of 500 million dinars ($380,000) or more.
He explained that the goal of setting this ceiling was to evaluate the strengths and weaknesses of this decision, and therefore a time period of approximately two years was allocated to study all aspects and challenges related to its implementation.
Ali stressed that the decision proved to be very successful in serving the desired goals, and a decision was taken to gradually reduce this ceiling to include larger categories of real estate sales.
He pointed out that this decision contributes significantly to combating money laundering and terrorist financing, as it provides important databases used in investigations carried out by legal authorities and financial investigations conducted by the Anti-Money Laundering Office. It also preserves the rights of both the seller and the buyer, as all documents are documented. Financial movements related to selling in banks.
Ali added that the Central Bank worked during the past two years to prepare and qualify banks to implement this decision, by establishing a strong infrastructure and providing them with the necessary expertise.
He pointed out that this method is used in most countries of the world, because real estate transactions are considered one of the sectors most vulnerable to money laundering, so forcing buyers to deposit money in banks makes it easier for the concerned authorities to track this money.
Ali pointed out that there are future plans to link the Real Estate Registration Department to banks electronically, in order to facilitate procedures and reduce paper transactions.
He also stressed that the Central Bank is taking all necessary measures to protect the rights of citizens from any corruption or extortion operations that may occur.
Limited effect
For his part, the economist in the real estate market, Hammam Al-Shamaa, expressed his belief that the recent decision of the Central Bank of Iraq regarding the sale of real estate will not significantly affect small real estate, explaining that this is due to the fact that the funds from these real estate are mostly of a known source.
Speaking to Al Jazeera Net, Al-Shamaa stressed the necessity of implementing this decision perfectly to achieve its goal, which is combating money laundering, warning against it being exploited in negative ways by some people.
He explained that the previous decision set the value of 500 million dinars for the sale and purchase of real estate that requires follow-up by the Central Bank, but the bank has now reduced this ceiling to 100 million dinars, with the necessity of completing the transaction in a banking manner.
He stressed that the Real Estate Registration Department will not register any property unless it is confirmed that its value has been deposited in an Iraqi bank, whether private or governmental.
Al-Shamaa explained that the procedure includes the bank directing a question to the person who wishes to deposit the money about its source, and is required to bring a document proving the source of this money, whether it is from the sale of previous real estate, gold jewelry, trade, or anything else.
He stressed that this is an important step to combat money laundering, provided that it is applied correctly without any corruption or bribery, warning that employees of the Real Estate Registration Department will exploit these procedures to pass sales transactions without the need to prove that the amount was deposited in the bank.
Parliament is moving
In turn, Representative Hussein Al-Sabari, Vice Chairman of the Investment Committee in the Iraqi Parliament, expressed his strong dissatisfaction with the recent decision of the Central Bank of Iraq regarding the sale of real estate, and stressed that this decision is part of the policy of confusion followed by the banking institution.
Al-Saabari stated in a special statement to Al-Jazeera Net that the Central Bank’s decision will lead to serious consequences for the Iraqi economy and the citizen and a decline in state revenues as a result of the decline in real estate price evaluations by citizens and their avoidance of dealing with them, which will negatively affect the state treasury.
He also stressed that the decision will face citizens with great difficulties in buying and selling real estate as a result of the complex procedures it imposed.
Al-Sabari pointed out that the decision will increase citizens’ distrust of the banking institution, especially since the majority of Iraqis do not trust banks and do not deposit their money in them, indicating that the decision will lead to a major recession in the real estate sector, which will negatively affect the investment environment in the country.
He pointed out that if there is confusion about the issue of money laundering, these properties are far from this description as they represent money known to citizens inside Iraq, wondering: Where is the money laundering in such simple transactions when they are not smuggled out of the country?
Al-Sabari stressed that the Central Bank’s decision is not consistent with the Iraqi economic reality and does not take into account the best interests of citizens, stressing that the majority of representatives and parliamentary committees reject this decision.
He explained that the Parliament’s Investment Committee will send an official letter to the Governor of the Central Bank asking him to study this decision and retract it.
