The Enforcement Directorate(ED), the agency responsible for investigating economic crime in India, has sought information from the Goa government on all companies that bought properties in the state between 2000 and 2007, as it investigates the role of a suspected Russian land mafia.
The agency suspects that some Indian companies that bought large plots in the state could have acted as fronts for Russian owners acquiring land in violation of the Foreign Exchange Management Act, or Fema, said a top enforcement official, who spoke on the condition of anonymity.
The directorate, which has been probing suspicious land transactions, has had little success in tracking such deals.
“Most of these cases are unreported due to the reluctance of state authorities to cooperate with our investigations,” the same official said. “We have asked the Goa government to find out the names of big companies that have bought land for promotion of tourism in Goa.”
Goa chief minister Digambar Kamat declined to comment on the issue in a telephone conversation. He also said a comment through email or fax would take time, citing the state assembly session that’s under way.
Goa, famous for its beaches, tropical biodiversity and a strong Portuguese influence on its culture and architecture, attracts a large number of foreign tourists every year who find it easier to blend in with the diverse local population than in any other Indian state. But parts of Goa have also acquired a reputation as a haven for drug dealers and land mafia.
Last year, CNN-IBN television news channel reported that the Russian land mafia had been throwing out small landholders and farmers, and grabbing prime land in fraudulent deals. Following reports of foreigners buying land in Goa in violation of Fema, the state government handed over details on 21 companies owned by Russian nationals to the directorate and the Reserve Bank of India, or RBI.
According to Ashutosh Limaye, associate director at the property consultant Jones Lang LaSalle Meghraj, increased vigilance over land deals by the police, forest laws and rules relating to coastal regulation zones have stalled land transactions in Goa now.
“The deal makers want to play it safe and are waiting for resolution of the ongoing issues,” he said.”The number of land transactions in Goa has definitely come down as a fallout of the land scam. Many deals, that were at the negotiation stage, have been stalled.”
Still, the “significant decline” in the number of land deals hasn’t led to a sharp fall in prices, which have remained stable, he said.
In May, the directorate issued notices under Fema to the promoters and directors of two companies—True Axis Resorts Pvt. Ltd and Artlibori Resorts Pvt. Ltd, owned by Russian citizens Leonid Beyzer and Valiulin Rashida, respectively, asking them why they should not be penalized. The other directors in True Axis are Pramod B. Walke and Fransico D’Souza, both from Goa.
Beyzer, who still lives in Goa had, in 2005, bought 25,000 sq. m of land, including 19,906 sq. m of prime agricultural land in Morjim, North Goa, for constructing a resort. He was in India on a tourist visa, according to the directorate.
Mint was unable to contact True Axis and Artlibori Resorts because their addresses weren’t readily available.
The directorate also sent notices to directors of another resort firm, Oriental Ambers Pvt. Ltd, only to find later that there was no office at the registered address. It has not been able to trace the local owners of Oriental Ambers either.
According to the enforcement official, under Fema, foreigners can buy land in India if they hold a business visa and have lived in the country for 182 days at a stretch in the previous financial year. Such individuals should also possess documentary evidence of either long-term employment or business or vocational pursuits in India.
Foreigners with business visas can purchase properties in the name of Indian entities registered with the registrar of companies and the local branch of RBI. They can buy land for personal use if they can prove their intention to stay in India for an indefinite period of time. Even then, they are not allowed to buy agricultural and plantation land.
According to the directorate’s investigations, Beyzer founded True Axis and infused capital in the firm as foreign direct investment, or FDI, under the automatic route of RBI available for non-resident Indians. The Indian central bank raised objections later on the source of money.
Under the automatic FDI route, RBI’s prior approval is not required. However, the firm should notify RBI about the transaction within 30 days of inward remittances for clearance.
“We found that True Axis was not using the money for construction of the proposed resort. Now, we have attached the commercial property of True Axis in Morjim and are waiting to hear from the promoters on the show-cause notice,” the same official said.
“We fear that a number of big companies owned by Russians have followed the same route to grab land in Goa,” he added. “The modus operandi of such individuals is to float a company with an Indian partner, who acts as a front to register the firm in Goa. The company then pumps in foreign investment for real estate deals. Once the firm buys the land, it splits from the Indian partner.”
The directorate is investigating more than 400 cases where foreigners from the UK, France and Russia have bought land in Goa under tourist visas.
“Many of them are retired foreigners who are peacefully living in Goa and are harmless, but the real threat is from Russian companies who are illegally acquiring land,” the enforcement official said.
The agency recorded statements of individuals in 100 cases and issued 15 so-called show-cause notices to some of them under Fema last month. According to the directorate, the number of cases of misuse of property laws in Goa can go up to 2,000.
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