Real State of Challenges

Govt. must try to not only weed out the black money from realty market but also provide affordable housing to its burgeoning middle class. 

India’s growing realty sector has become a multi faceted regulatory challenge for the Govt. On one hand the very purpose of providing affordable housing has fallen flat, on the other it has given rise to the circulation of black money in the absence of stringent regulations. In a bid to regulate this shoddy real estate market, the forthcoming budget might bring in a Real Estate Regulatory Authority. Flourishing realty sector is paramount as it is a 5% contributor to GDP and a huge source of job provider to unskilled labor. The multiplier impact of the same on its ancillary segments is also abundant. With the rapidly growing urban population providing affordable accommodation to them is the foremost duty of the Govt. It would be interesting to watch how it ensures transparency and affordability in the Indian Real Estate Sector through its recent effort of appointing a National Regulator.

The biggest trouble with the realty sector is that it has become a reliable source of parking black money emerging as one of the best investment option to evade taxes for people sitting on wads of unaccounted money. In addition to this numerous approvals needed for property purchase provides chain of chances to make many people party to corruption. This cartel of dealers, brokers, investors and corrupt bureaucrats involved in illicit transactions and illegal land acquisition makes it a tough call, a nightmare for middle class salaried house-hunters to even think of owning a house. Stringent RBI guidelines for land loans and the fact that most of the real estate transactions are made in cash makes it even tougher for them to acquire enough money to go for such high profile land deals. In the end it is only high-heeled crooks who grab the land and sells it on even higher prices giving birth to a vicious cycle. It seems that real sector boom is not because of the maxim of demand and supply but that of spare black money and no other option to invest.

While India is among the top countries in terms of housing and work space needs, it ranks 181 in construction permission processes according to the World Bank Doing Business Report 2012. Delays in consents add 40% to a project’s cost. It is in this back drop that Real Estate sector is in hope of acquiring industry and infrastructure status, a demand further endorsed by Confederation of Real Estate Developers' Associations of India (CREDAI) - NCR and Federation of Indian Chambers of Commerce and Industry (FICCI). It will make affordable housing a sub-sector which will reduce the no. of approvals requisite from the state Govt. It will also help cash strapped developers to easily procure finance from banks.

As above mentioned, efforts are made in the forthcoming budget session to approve a Real Estate Regulatory bill in order to keep a check over unrestrained and concealed land transactions. As per this regulatory bill, the developer has to get accreditation from national regulator and make a public disclosure of on-sale property intimating them with all necessary details. Regulator will also ensure that separate bank accounts for each project are maintained to collect payments from buyers. However, strong nexus between real estate market players and politicians leaves the success of this real estate regulatory bill suspicious.

Govt. must recall that the three major economies i.e. of USA, UK and to some extent of China went into a deep slowdown just because their real estate market failed. The significance of realty sector is bumping up day by day with the ever increasing population. It is high time that the actual status of demand and supply of housing is maintained so that a middle class salaried person isn’t charged exorbitantly out of market price. It is required that whatever measures are being taken in the upcoming budget session, must be impeccable enough to strongly tighten the Indian Real Estate Sector.