It is an industry that has been growing exponentially in the last decade resulting in prices skyrocketing. But it is also an industry with hardly any entry barriers. While there are some players whose practices match any other?s in any other mature industry, much of it is seeped in opaqueness. Moreover, land being a state subject, laws governing property and real estate development vary vastly across the country. In such a scenario ? especially with consumers getting the short end of the stick ?there has been a lot of debate on the need for a regulator along the lines of insurance and telecom. Even as a draft of the Real Estate Management Bill is expected to be placed in the budget session of the parliament, there is little information what it is going to be.
Meanwhile, the ministry of Urban Development has decided to set up a Regulatory Authority to monitor and curb malpractices in real estate activities in Delhi and the NCR region and also address the grievances of builders and developers, which will come into effect by early this year as disclosed at a recent ASSOCHAM conference by Union Minister for Urban Development, Jaipal Reddy. He added that the proposed authority would work as a role model for other states to follow, particularly in view of growing real estate activities throughout the country so that the consumers get a fair deal.
?We already have regulatory bodies for all the technical aspects of real estate projects such as local municipalities, urban development authorities, etc. A central regulator body for real estate is welcome as long as its role is clearly defined without any ambiguity to the developers, customers and the local regulatory authorities. In addition to bringing in transparency, such a body will serve as a definitive source of market information and will be of immense help to the developers make informed decisions,? I. Syam Prasad Reddy, CEO & MD, Indu Group, a Hyderabad-based developer.
The regulatory body may focus on the marketing aspects of the real estate projects to ensure that the customer?s interests are protected. The body need not involve itself in pricing of the property/product (which should be market-driven) but should ensure that the customer gets what she/he is promised. The role should integrate well with other related regulatory bodies like the one SEBI is proposing for Real Estate Investment Trusts (REIT), he adds.
Moreover, the regulator?s presence is also expected to bridge the vast demand-supply gap. ?This will also bring in much needed credibility and respect for the industry. At the same time there are misgivings among some members of the NAREDCO that a regulator will be loaded in favour of consumers,? feels Sanjeev Srivastav, chairman and managing director, Assotech Ltd, a Noida-based developer.
Pratish Devadoss, Director of the Chennai-based VGN Enterprises feels that right now there are only the state regulatory bodies like the CMDA. ?We definitely need to have a central regulatory body which has a clear vision for the entire industry across the country. They can probably look at areas like infrastructure, prices, rental value, height of the buildings etc. They can also come out with realistic index values for the properties in different regions so that the customers will get a fair idea at the prevailing rates. The guideline values which we have right now needs to be updated. It is also important that the mandate for the regulatory body should be made after consultation with the real estate developers.?
Players feel that the regulatory authority can be formed taking examples from other regulatory bodies both in the domestic and international market say in terms of structure and functions.
Taking a contrarian view, Kumar Gera, chairman, Confederation of Real Estate Developers? Association of India (CREDAI) which represents developers predominantly from the south and west argues: ?Frankly, I don?t think there is a need for a regulator. Land is a state subject and already there are many laws governing property and real estate development. What one needs is effectively implementing them.? While some states like Maharashtra, Gujarat and Karnataka have laws which are considered very good, others, like Uttar Pradesh, Delhi and Bihar are found wanting.
At the same time, there are also some players who view the setting up of a regulator positively but say its role should be specific and limited. ?If the role of the regulator is that of arbitrating between the builder and a buyer, then it is welcome. But if it is someone who puts a spoke in the wheel, then it is not welcome as it leads to corruption the way it happened in the education sector,? stresses Kaushik Sengupta, vice president, sales & marketing of the Delhi-based Eros Group. According to him the proposed Bill is expected to address some issues like pre-launch advertising of properties, which will be stopped. Another is that all the money collected for a project will be kept in a separate account. ?As I understand, the draft copy of the Bill is in the lines of the Housing Policy of the Government of Maharashtra.
?Even assuming there is a central regulatory authority, I wonder how it will work. One, I see a lot of impracticalities in implementation. Two, what is the objective of such an authority? It is to protect the interests of consumers. Then, already there are enough laws and agencies to implement them whether it is the general courts or the consumer courts,? stresses Gera. He adds that there is no clarity on what it is going to be and how it will cover over 4,000 cities in various cities across the country. Moreover, how it will contravene or supercede the local laws.
The moot point, however, is transparency, which a major portion of the industry has given a go by thus making the industry suspect in its functions and transactions. Even property or real estate agents who have proliferated everywhere are a notorious lot. Players are unanimous that they definitely need to regulated by way of certification and licensing to operate the business.
?It is tragic that the media, the bureaucracy and politicians judge the industry by seeing what is happening in say Delhi, Gurgaon, Noida or in some parts of Mumbai. There are hundreds of projects wherein you can get an apartment in Pune or Bangalore without paying even one rupee in cash,? challenges Gera.