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Attorneys Praise Exchange Control 'Red Carpet Roll Out'

Central Bank of the Bahamas.

Central Bank of the Bahamas.

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Attorneys yesterday praised the Central Bank's proposal to relax exchange controls on non-residential real estate deals as "a rolling out of the red carpet that everyone will welcome".

Adrian White, former head of The Bahamas Bar Association's real estate committee, told Tribune Business that the move would improve this nation's competitiveness and attractiveness to foreign direct investment (FDI) in the real estate sector.

"I think that's wonderful news," he said of the reforms, which the Central Bank plans to implement with effect from October 1. "That's [exchange control approvals] been one of the most significant problems and impediments to what would otherwise be a more positive outlook on the ease of doing business as far as real estate transactions in The Bahamas are concerned.

"If you've been in the industry, and dealing with what's been placed on you, this is a rolling out of the red carpet that I think everyone will welcome. It's very positive news for the country. It shouldn't be as exciting as it is, and may seem a simple thing to do, but exchange control restrictions and regulations have hampered excitement in the past and have now been lifted."

Sharlyn Smith, the current Bar real estate committee head, told this newspaper the move had the legal profession's "wholehearted" support as a "win-win" that would boost real estate market efficiency and competitiveness while still preserving the country's balance of payments objectives and one:one peg with the US dollar.

"We support the introduction of anything that improves the administration process in conveyancing matters," she said. "This step by the Central Bank certainly does that and it improves what's there now. It allows sales to be completed quicker and we support it wholeheartedly.

"It reduces costs somewhat and reduces the steps. It can help position the international market to view The Bahamas as an easy place to do business where your transaction can be completed with less bureaucracy, which will support the ease of doing business."

Noting that the Central Bank's latest planned exchange control liberalisation will not undermine the fixed peg exchange rate regime, Ms Smith added: "It can be done while preserving everything The Bahamas has to preserve.

"It's a win-win while maintaining what the Central Bank is interested in maintaining and the Investments Board approval regime. There's no concern about the floodgates being opened. This is just an improvement in the administrative process, and everyone supports that. It doesn't jeopardise any of the principles that are important."

The Central Bank, in a four-page document outlining its liberalisation rationale, admitted that the current requirement to obtain Central Bank exchange control approval for real estate transactions involving expatriates had created "a very regimented process".

Under the proposed changes, foreshadowed this summer by governor John Rolle, no applications to the Central Bank for approval of "any aspect" of residential real estate deals will be required.

Foreign purchasers will automatically inherit "approved investment status" on completion of such transactions, with the sale of shares in companies that hold real estate also enjoying the exemption from exchange control approvals.

While foreign real estate developers will still need to obtain exchange control approvals at the initial stages of their projects, subsequent sales of subdivided units or constructed homes will also be free from such requirements.

And the Central Bank is planning to delegate the authority to convert Bahamian dollar proceeds from real estate sales to foreign currency, ahead of their repatriation to the foreign seller, to the Bahamian commercial banks once evidence is supplied that the vendor is non-resident.

Describing the moves as "really positive news for the real estate industry in The Bahamas in terms of the second home market", Mr White said the sector seemed to have seen an increase in "the duplication of due diligence requirements" imposed on attorneys and their clients in recent months.

He added that the banks, in particular, had been asking for more information on overseas buyers and their source of funds even though professions such as attorneys and realtors were covered by the Financial Transactions Reporting Act and overseen in this area by the Compliance Commission.

Mr White said this all added up to attorneys, realtors, banks, the Investments Board and the Central Bank conducting similar due diligence on the same persons, resulting in a major duplication of effort and paperwork that generates unnecessary bureaucracy and red tape.

Now, with the Central Bank stepping out of the way, Mr White said investor clients could be informed that "one of the more significant hurdles - not so much with closing, but getting funds to clients from the sale and out of attorneys' accounts" - had been eliminated.

With a potentially "prohibitive deterrent" to foreign investment and residence in exchange controls now removed, he added: "A large amount of the revenue collected by the Department of Inland Revenue is from VAT on real estate transactions.

"If we increase the number of real estate transactions in The Bahamas by making the process easier through the elimination of exchange controls, it's going to improve the attractiveness of the jurisdiction, ease of business and result in an increase in revenue for the Public Treasury and Department of Inland Revenue."

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