When it comes to best practices in the real estate sector, there seems to be a huge chasm between the claims of many builders and the actual practices on ground. With buyers having low levels of confidence in developers and a prolonged slowdown in the real estate market, developers can no longer merely blame market conditions for poor sales. Developers urgently need to make change in their business practices, to regain buyers’ confidence.
Reasons for buyers’ low confidence in builders
- There are scores of cases being fought by home buyers, in the consumer and civil courts.
- Real estate complaints are among the top four legal issues in the country.
- Even when a court orders heavy compensation or a refund, the developer files an appeal and the case proceeds on to a new hearing.
- There is no mechanism to ensure that stalled projects are kick-started or buyers are compensated.
- At times, consumer activism can even lead to cancellation of the allotted unit, for raking up the issue publicly.
Best practices: How Indian realty fares versus developed global markets
Several analysts point out that developers too face challenges, in adopting the best practices in the sector. Issues like multi-partner projects, inability of the developer to execute large projects because of their organisational limitations, financial leverage (personal equity versus project cost), lack of a competent team of vendors and huge costs, are some of the factors that force developers to compromise on professional integrity.
See also: ‘Only adoption of global best practices can help developers regain buyers’ trust’
According to AS Sivaramakrishnan, head – residential services, CBRE South Asia, the quality of the product and its delivery, along with its pace of construction, are the crucial factors that determine customer satisfaction. With the implementation of the Real Estate (Regulation and Development) Act, these practices will become even more important for development firms, he says.
“In mature global housing markets, all aspects of developing and maintaining a residential project are handled by professional firms, unlike the case in India. Developers should increasingly focus on their product, rather than on marketing,” he maintains.
How developers can gain buyers’ trust
Vineet Relia, managing director of SARE Homes, insists that transparency, fair norms and delivering on the promises that they make, are imperative to change the negative perceptions. Moreover, instead of a commodity-selling approach, developers should adopt a value-based, professional approach that keeps customers fully-informed about all the benefits of investing in a particular project.
“Best practices in Indian real estate were majorly non-existent, until recently. Moreover, each market has its own drivers and challenges and comparisons can be unfair. Nevertheless, the best practices used by a few professional developers, compare favourably with global standards. Consistent performance, proper pricing of products and excellent service, before, during and after sales, can play a pivotal role in the success of any developer,” feels Relia.
JC Sharma, VC and MD, Sobha Limited, agrees that the general perception in the market is not very positive. Sharma maintains that it is imperative for developers, to focus on corporate governance, accountability and timely delivery of projects.
Home buyers’ wish-list
- Title assurance and right to see all approvals in place.
- Rates based on carpet area.
- Right to a full refund within 30 days of booking.
- Penalties for delays in completion.
- No change in the layout and area, once they have made their booking.
- No hidden charges or escalation charges.
- Separate escrow account mechanism.
- Fair agreements with indemnities for delays, poor workmanship, etc.
- Open and transparent communication throughout the project’s construction period.
(The writer is CEO, Track2Realty)