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Regulating the Real Estate

Dr Nitin Pandey

7-Oct-2007
One of the sectors with the biggest turnover in India is the Real Estate Sector and surprisingly, perhaps purposefully, this sector has been left unregulated and disorganized. With the country's unofficial economy far exceeding the official economies of most states, control of black money has apparently been on high Government priority list for a long time now. Given the huge amounts of black money Real Estate Sector churns out, absence of efforts to regulate it are rather mysterious.

One of the biggest reasons for this blind eye seems to be the liberal donations given by Property Dealers to all mainstream national parties. Parties need funds to run and need to maintain a generous source of such funds is important. Real Estate Agents masquerading as politicians, found in all political parties, also thwart any attempt to regulate this sector.

The blunt of this non-regulation is borne by the common man. Property prices are routinely manipulated, encroachments and land grabs are common in all cities, trees are cut down with impunity, building laws flouted and innocent people duped with bad property. The realtor - politician nexus prevents law enforcing agencies from doing their job and gives the former a free run.

Why are Real Estate Agents not registered is anyone's guess. If Doctors, Engineers, Architects, Accountants and even road side vendors can be registered, why are Property Dealers exempt? As a first step, all existing Property Dealers should be registered. After a few years, a degree in law should be compulsory for new entrants in the field. This will ensure that this profession is not the last resort of someone who has nothing else to do, which at present it is and quality people enter the field.

Another step to prevent hapless people from being duped by unscrupulous property dealers would be to make the dealer legally responsible for the correctness of the property. The Dealer should verify the authenticity of the property before selling it and be liable to be sued if any defects in it are found later on. Absence of such a responsibility at present leaves innocent buyers hanging high and dry. Anther way to enforce this would be to require that all registries of sale should mention the name of the broker involved. Another benefit of such an entry would be to force the dealer to mention the deal and the commission he received in his annual returns, thereby increasing the revenues of the Government.

The glitter in the Real Estate Sector comes from the black money it generates. Properties are undervalued at the time of registry and the balance amount is given in cash. The ration of black to white varies from 60% to 40% in various cities. To discourage such a practice, the Government could reserve the right to buy any property it finds grossly undervalued at the time of registry, by giving an additional 10% of the quoted amount to the seller. Even the threat of such a possibility will reduce dramatically the black money transactions in property deals.

Finally like most other professionals, Real Estate Agents should be required to submit annual returns of all deals done by them plus the deals in which they appeared as a witness. The present practice is for the dealer to appear as a witness in all transactions he facilitates. This apparently helps to reassure the buyer. Appearing as a witness, without receiving any monetary benefits for numerous people would be difficult to explain.

Regulating the Real Estate Sector is vital if the government is serious about controlling the black money monster in India and the resultant corruption. This requires political will which appears to be extinct in this era of coalition governments.


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From: AVINASH PANDEY
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From: AVINASH PANDEY
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