Getting real about real estate

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Realty firms on hiring spree againDLF profit crumbles 77%Realty demand up 15% in Q2‘Property rates to fall 25% in 12-15 months’

: to ensure a more equitable distribution of land. However, this hampered the process of sale and reuse of urban land that they ended up helping in raising land prices. One of the Act's main provisions includes setting a limit on the ownership of vacant land, so as to provide cheaper land to poor communities. As such, the Act gives power to state governments to acquire any excess vacant land above the limits set by the Act, to regulate the transfer of ownership of the vacant land, and distribute it according to the common good. Under the Act, individual states are authorised to grant exemptions depending on the category of land. However, all this act ended up doing was to give too much power to state governments, lock up large portions of land in never-ending legal battles resulting in an unduly low supply of land for housing and development, and boosting land prices, particularly in the larger cities.

Then there is the stamp duty of 5-14%. This is high when compared to most countries around the world have a duty of barely 1-2%. High stamp duty coupled with property taxes, have caused many buyers from shying away to register their property deals, says experts.

So the need to be careful while transacting becomes important. Transfers through the 'power of attorney' route are increasingly common, and is another used trick by investors. This too only adds to the already opaque nature of our real estate markets since even tracking deals has become a challenge.

Most builders still have a very high cash transaction ratio. This not only undermines the paper value of the property you buy, but also puts you through the trouble of having to come up with large amounts in cash, sometimes as high as 50-70%. These cash-based transactions are typically routed through various shell companies.

In India, one never knows till the fat lady sings, if a property deal is finalised or not, says a real estate guru, not wanting to be named. Buyers very often invest money on undeveloped and developing projects of builders, as they are able to acquire the property at a cheaper rate, then when the project is complete. While this is essentially a punt taken by many investors, in the current scenario doing so is ill-advised.