logo
Industry News ‘Grenada Clamps Down on Real Estate Undercutting’

Industry News ‘Grenada Clamps Down on Real Estate Undercutting’


23rd July 2020

In a bold move to protect the integrity of its Citizenship by Investment (CBI) Programme, Grenada is promising to take action against all agents found to be illegally discounting the investment amount under the approved project arm of its Programme.

Intentionally underselling the cost of real estate investments under Caribbean CBI Programmes is a reprehensible practice that, if allowed to go unchecked, could lead to disastrous consequences for the Caribbean. Not only do such practices exhibit a blatant contempt for the law governing CBI programmes, they alienate the many agents who adhere stringently to the terms of the programmes to which they are accredited, and cheat Governments and their citizens out of valuable foreign direct investment.

False advertisement has been known to take various forms, including through inducing applicants to invest amounts below the minimum threshold by returning monies in the form of substantial incentives or commissions. Another example is the promotion of share repurchasing arrangements taking place before the end of applicable minimum hold periods. As is the case in all Caribbean CBI jurisdictions, real estate investments must be held for a minimum number of years before being re-sold. Where an economic citizen sells real estate before the end of this statutory period, strict sanctions apply and, in some cases, include the revocation of citizenship and disqualification from further participation in the relevant programme.
The rogue agents who participate in undercutting do so not only at the expense of small countries seeking investment, therefore, but also at the expense of unsuspecting investors, who could find themselves facing the loss of their citizenship. This risk was highlighted by Sam Bayat, former president of the International Section of the Canadian Bar in Quebec and CEO of citizenship consultancy and law firm, Bayat Group. While talking with WIC News Bayat warned that applicants who obtain citizenship through illegally discounted real estate investments “could lose their investments or have their citizenships revoked.”

Recently, WIC News exposed the price undercutting scam by some agents and developers in the Caribbean, raising ears of the governments. The shameful attempts to misrepresent the costs of real estate are the reason behind “CBI Projects are turned into cash cows in the Caribbean,” said Sam Bayat.
The effects of adverse promotional practices on Caribbean CBI jurisdictions are felt in numerous ways. Firstly, undercutting implies that the real estate in question is not worth the cost at which it is advertised, thus disincentivising investments in real estate and causing real estate markets to suffer from a lack of demand. Undercutting even devalues the benefits of applying under the fund options of Caribbean CBI Programmes. Many applicants choose the fund option, despite not being able to obtain a return-on investment, because it is a one-time contribution at a lower cost than the real estate option. When real estate is promoted at a lower threshold than the fund option, the incentive to contribute to the fund is thereby eradicated and Governments are denied the opportunity to invest in much-needed economic growth and diversification.

Cognisant of the detriment undercutting can cause, Percival Clouden, CEO of the Grenada Citizenship by Investment Committee, issued a cautionary circular on behalf of the Committee to all industry stakeholders on 22 July 2020. Addressing all Marketing and Local Agents, the Committee warned that actions which discount the investment below the minimum amount prescribed by law “are illegal and in breach of the Grenada CBI Act and Regulations” and further announced that an investigation is being conducted into the matter.
Transparency and integrity are at the heart of CBI in the Caribbean and it is shameful that there are a handful of agents willing to tarnish the reputation of the CBI industry, despite witnessing first-hand just how vital CBI has been for certain Caribbean nations. As such, a zero-tolerance approach must be taken when it comes to undercutting. In addressing the illegality of underselling practices and attempting to foster adherence to the rule of law, Grenada is setting an excellent example to which other Caribbean CBI countries should take heed.

Apart from this, reliable government sources in Caribbean region revealed that several countries which offers CBI Programme are taking the lead of Grenada’s action against offenders. On condition of anonymity, senior government official of Caribbean island said that most of the governments in Caribbean are going to introduce such circular to halt abuse of the “Prestigious Programme”.

Source - WIC News
image
Enquire
image
call
image
whatsapp
image
telegram
image
Enquire
image
call
image
whatsapp
image
telegram