By: Sachin Sandhir, MD, RICS South Asia
Track2Realty Exclusive: Irregularities exist in the real estate sector and add to the common perception of the sector being opaque. For example, in the primary market, builder-buyer agreements are often one-sided that favour the development firm.
In the recent past, a number of cases have made news headlines, where development firms have raised property rates to unreasonably high levels and buyers had to reach out to the courts to resolve the matter. Developers were able to hike the rates because clauses in the builder-buyer agreements favoured them instead of buyers.
Another example of an irregularity is the way properties in the resale market are priced and tagged. Despite a benchmark number in the form of circle rates, properties are priced two to five times higher than the actual rate. Circle rate is the minimum rate defined by all state governments at which a property can be bought or sold. Within a state, there are different circle rates for different cities and within a city, circle rates vary according to the locality.
In an opaque real estate market like ours, which lacks an accurate price index, circle rates provide a basis for pricing. But due to price speculation, there is always a component of cash involved that is used over and above the published rate. Thus the actual value of a property is often higher than the published rate.
Factors such as lack of professionalism, high degree of fragmentation in the market, shortage of qualified professionals and a partial paralysis on the policy front have given a wrong image to the sector. On the business front, this has also resulted in a decline in investment sentiment. There are a few measures that can lend a positive and a credible image to the sector.
Till date, consumers are at the lowest end of the entire ecosystem of the property market. They continue to suffer as a result of various shortcomings in our policies. Thus, it is imperative to bring in regulation that safeguards buyers’ interests.
The long pending Real Estate Regulation Bill 2013 that was tabled in the monsoon session of the Parliament last year and later sent to a standing committee for further discussion should see the light of the day in the near future. The regulation has the potential to speed up the registration of projects thereby streamlining the construction process, right from the inception to the announcement and the final delivery.
…to be continued
