The secondary real estate market in India has started showing signs of recovery, after being hit by the demonetisation drive. However, the industry and property buyers expect the government to streamline the market. A recent survey report by Grant Thornton, FICCI and Escrowffrr, on ‘Improving Transparency in Secondary Real Estate Market’ shows that 47 per cent of the respondents want the government to streamline the secondary real estate market, to avoid paying high stamp duty and other taxes, by making the escrow mechanism compulsory. Also, about 40 per cent feel that rationalisation of stamp duty and standard agreements, will give a boost to the overall sector and bring in transparency.
Overall, the survey reflects a buoyant mood in the market, as more than 90 per cent of the surveyed property buyers, believe that buying a resale property is better than buying a primary property, as it eliminates the risk of delays and provides an opportunity to physically check and see the property being purchased. The report further states that in 2017-18, about 72 per cent of the transactions in Delhi-NCR were concluded in the secondary segment, while only 28 per cent were concluded in the primary segment, which clearly exhibits weak consumer sentiments towards primary sales. On the other hand, cities like Bengaluru, Chennai and Hyderabad recorded, on average, 72 per cent primary transactions, while Mumbai, Pune and Kolkata showed almost an equal distribution.
Commenting on the survey results, Neeraj Sharma, director of Grant Thornton Advisory Private Limited said, “Consumer sentiments towards the primary market are feeble, due to factors like delay in possession, lack of trust in developers and ambiguous pricing for services not opted. However, execution challenges and consumer confidence are subject to the upcoming general elections in 2019, in terms of policy-level initiatives to bring in transparency into the secondary real estate market.”
When asked about the common challenges faced while buying a resale property, about 74 per cent of the respondents feel that while purchasing a resale property, background legal check is a major challenge. They also feel that they are more prone to losing their money paid to the seller in cash or cheque and majority (63 per cent) of the respondents feel that an escrow mechanism can mitigate the apprehension. Another set of respondents reckoned that finding the right property at the right price is a challenge.
The report recommends that the government should focus on digitising of property records across the nation and build an effective escrow mechanism, to bring in transparency and reduce litigations in the secondary real estate market.
The report further emphasises that there is a need to rationalise the tax structure, by subsuming stamp duty as part of GST and the government should look at bringing in a single licence fee for real estate agents across the country, to match global standards.
“A majority of the respondents have opined that formalisation in the market should happen, which will further bring transparency and authority in real estate dealings and reduce litigations. This will also improve the ease of availability of financing options in the market. A major outcome of the survey is that the industry feels that transactions must happen through banking channels,” said Dilip Chenoy, secretary general, FICCI.