(Un)Real estate sector in India

deepakraam

Par 100 posts (V.I.P)
India is one of the fastest developing economies among the BRIC nations.India is poised to grow @ 8+ growth rate and infrastrucuture is set to lead the pace.Govt is mulling to pump ~$1 trillion in the infrastructure space.India is a booming market for the real estate sector be it commercial or residential.In the midst of the growth story we should not loose sight on the regulatory fundamentals.Many companies disappear after collecting money from people promising flats and many builders don't wait for the regulatory approval before start to sell the flats.Huge chunks of land are acquired by builders and layout plans are uploaded in their respective websites before getting necessary approvals.Even Unit cost/Sqft are decided and houses are sold in the name of pre-launch phase.Once the project is approved,prices are touching the stratospheric levels.Almost every builder claims that ~50%-60% of the flats are sold in the pre-launch phase.This creates a vicious cycle esp real estate sector.Some of the key points that are getting missed out in this space.

1. Most customers book flats as an investment option rather than an end user.People calculate the amount it can fetch in another 3-4 yrs and on the way forget some important things.People don't really scrutinise the land documents and ECs.This is making the job easy for builders to cheat common man.

2. People don't do the homework of checking the reputation of the builders.Some builders exist only on papers and inturn people end up being cheated.

3. Development authorities don't do proper verification of the land before the approving the project.Corruption is the main reason for this.

4. Development of a particular area lies only on the consortium of the builders.If a particular area has 4-5 apartments of reputed builders then the base price of that particular area skyrockets.Development authorities must put a cap on the no.of approvals/locality in an year.This will save mainly the water table & will control the price increase of that particular area.If the water table is not sufficient for the current population,no question of future approvals.

5. Even some banks don't do the checking of the plan before approving the loan amount.Banks only target credit growth.This approach must change.This will substantially reduce the NPAs in the balance sheet.

With the above measures we can expect the real sector to stabilise and be real consumer-friendly.

-Deepak.
 

Patta

New member
Another problem I notice with the Indian real estate economy (viewing it from otuside India): the transactional details (including price) of a flat/house sale/re-sale is not available widely as a matter of public record. Prices are often inflated beyond what might be market-fair, since (rpesumably) there is always a sucker willing to buy at any quoted price. Living in the US, I have access to transactional histories and market valuations on pretty nearly every single house with a street address that exists in the US. Wide availability of data will reduce the "chaos" in the market; while it cannot stop speculation, it can help achieve greater uniformity. The situation is aggravated by the fact that real estate in India is often used to convert the color of money from black to white.
 
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