In an exclusive interaction with Housing News, Sachin Sandhir, global managing director – emerging business of RICS, points out that India considerably lags behind mature real estate markets, such as the US and UK on many fronts. It will take the industry some time to evolve. However, change is clearly in the air, he says.
Q: What is the biggest problem faced by the real estate sector today?
A: The Indian real estate industry’s biggest problem, is its negative image among the public. Home buyers do not trust that developers will deliver their projects on time. There is a reason for this distrust. In the last few years, we have seen several instances of delays in the delivery of apartments. This has negatively impacted home sales, especially in markets such as Delhi-NCR. Real estate developers will have to regain the confidence of home buyers, to revive home sales.
Q: How important is it for Indian developers to adopt global best practices and where should they start?
A: Adopting global best practices, may help in reversing the negative perception of the industry. This is no longer a matter of choice.
In these tough times, only professionally managed developers will survive. Government regulations, such as Real Estate (Regulation and Development) Act, 2016 (RERA), have called for penalties against errant developers. This naturally means that developers will have to focus on project management.
Developers will have to hire professionals and efficiently manage their projects. This is easier said than done.
The real estate and construction industry has the highest shortfall in skilled professionals, partly because there are not many educational institutions that offer specialised courses on real estate and construction. Moreover, real estate professionals in India do not match up to global standards. This discourages international investors, who prefer to partner with professionals who have technical expertise that is at par with international standards.
Q: Do you see this happening any time soon?
A: This is possible, only if the concept of ‘professional qualification’ in specialised fields, such as land, property and construction, is taken seriously. While we have real estate professionals educated in architecture, engineering and other related streams, it is important that they acquire chartered qualification that is similar to qualification in other fields such as Certified Public Accountant (CPA), Chartered Financial Analyst (CFA) and Chartered Accountant (CA).
Q: How do you rate Indian real estate, vis-à-vis some of the accepted global best practices?
A: The Indian real estate market lacks accountability, unlike real estate markets in the UK, the US and the Republic of South Africa. Real estate markets in these countries are regulated through legislation, voluntary schemes and self-regulation, across town planning, building development and regulation of property transaction activities.
Standards and regulations in the US and UK, largely focus on the quality of buildings through building regulations and codes. In the UK providers of residential housing, usually conform to the standards laid down by the National House Builders Council (NHBC), which provides warranty and insurance, covering 80% of new homes built in the UK.
In South Africa, there is statutory body called the National Home Builders Registration Council (NHBRC), which mandatorily provides protection to all new housing consumers against building defects.
Q: Which are the areas in India that need to be regulated?
A: There are three areas in India that need to be regulated – construction of buildings, buying and selling of property (including primary and secondary market) and rental /management of buildings.
A robust regulatory mechanism should include a combination of legislation, regulation or enforcement of legislation, consumer redressal mechanisms and uniform standards.
Q: What is your opinion on the valuation mechanism in India?
A: Professional valuations are important for a healthy property market because they form the basis of financial decisions, dispute resolution, taxation and various statutory applications. International Valuation Standards (IVS) are a globally consistent set of practices that form the basis of high quality valuations.
In India, the valuation profession is unorganised and not governed by any specific laws, authority or regulation. The lack of transparency and established standards for valuation of land and property, have resulted in confusion over valuation of real estate companies and market value of land and property assets. Consequently, under-reporting of value, inflated valuations, unprecedented price escalations, inaccurate compensation to land owners, etc., are common problems.
(The writer is CEO, Track2Realty)