Regulatory framework and polices in real estate

India is a country where despite all the hectic activities that are happening in the real estate industry, it is still at a very primitive stage, highly unregulated and not properly organised. In terms of human resources deployment and employment opportunities, it is second only to agriculture in our country. Yet it does not enjoy the status of an Industry.

Now our government is very much aware that unless proper regulatory framework and policies are in place, it can be counterproductive and jeopardise the Government’s agenda of economic reforms with respect to poverty alleviation, affordable housing etc, and can also make things very difficult for the industry.

After lot of debates at various forums, and approved by Union Cabinet on 4th June 2013, the Government did introduce the Real Estate (Regulation & Development) Bill 2013 in the Rajya Sabha piloted by Minister for Housing & Urban Poverty Alleviation Girija Vyas on 14th August 2013. It was later referred to the Parliament Standing Committee on Urban Development.

Why this Regulatory Bill to be passed soon?

Everybody knows that India is a growing economy and a future economic super power. The process of reforms is already de-stabilised and slowed down because of political reasons, corruption and black money. The internal problems coupled with external conditions are delaying many of critical programs of the Government towards economic stability. Rupee as a currency is severely beaten and downsized. Many poorer performing economies are smarting up and overtaking us. If this is to continue for some more time, India might not find a place in ‘BRICS’. Investors are reluctant to place their bet on India and this is affecting our FDI inflows.

It is also a common knowledge that the biggest menace of Indian economy is the black money supply in our country. And Real Estate business contributes almost 70 per cent of total black money generated here. This is killing our growth potential and negates gains from other opportunities. This industry already contributes substantially to our GDP, large scale employments are generated from unskilled to technocrats; current housing shortage and future needs make it a sunshine industry at least for another 50 years to come.

There is enough availability of land banks and Real Estate is where FDI is already opened up. All these reasons and more make it ripe enough for Real Estate to get proper Industry status and the sooner our Government applies the finishing touches, by coming out with exhaustive policies and Regulatory Bill, the better it will be for stakeholders and other core industries such as cement and steel. This will also affect financial institutions, real estate brokers and of course, the end users. The Bill should also pave way for common policies for the entire country, but with powers vested with state governments.

Roles and responsibilities of stakeholders

Implementation of proper regulations in real estate sector is a social priority and unless we understand each other’s role and bring out the implementation program on a war-footing, without trespassing into other’s territory, without any blame game, this cannot be achieved.

The major stakeholders in this process include the following:

1. The Government: The State Government can in turn delegate the implementation work through their Housing Ministry to individual Districts and then to Mega City Development Authorities, Municipalities and Panchayat Unions.
2. The builders through a self regulatory body like CREDAI
3. The banks and other financial institutions through NHB/RBI
4. Real estate agents through a body like NAR India
5. The end user/consumer.

While the role of government is more and very critical as a Regulator, it should clearly spell out its responsibilities and redress methodology and compensations for the affected, in case of its own failure. The extensive usage of Information Technology, by totally computerising the Governmental functions and networking it with other critical departments across the States, and updating the data every month, allowing general public access services like obtaining of ECs, Pattas etc through designated service centres and thus minimising the visits by public to the offices even for petty services.

The Builders as a business community always try to take advantage of ignorance of their customers. Transparency in their dealings especially when they market a space should be monitored and they should ensure that they don’t promote or sell any project before proper approvals are in place. Perhaps, the honest few can even be rewarded by the Local Bodies/Government Agencies. Very strict enforcement and penalties leading to debarment from the business for non-compliances may be awarded.

The NHB should come out with proper guidelines and terms of financing for various Housing Projects. Priority should be given for affordable and smaller housing projects. The rate of interest should be concessional for such low cost housing which should not carry any hidden costs like processing fees etc and should be fixed for at least 5 years. This concessional rate of interest should be part of FM’s budget offerings and cannot be reviewed for at least one year. Additional benefits may also be offered for people buying in semi urban and rural belts for facilitating reverse migration from cities.

The brokers and real estate agents need to be qualified and strictly follow the guidelines and work under the framework of NAR India. Transparency and honesty in their work culture will also bring out professionalism and more business and more such entrepreneurs.

The role of the end-user is minimum, but very important. They should never encourage cash transactions, but strictly follow the thumb rules not mindful of a few extra bucks so that they don’t fall easy prey for wrong doers and lose heavily in the bargain.

A V Murali, MD, Green Earth Properties

“The views expressed in this article are the author’s own.