The real estate sector in India has miles to go, before it can state that it has adopted some of the globally-accepted best practices. Data available with Track2Realty, shows that real estate complaints are among the top four legal issues in the country. The continuing slowdown in 2016, along with overt consumer activism, social media outcry, media trial and judicial interventions, forced the sector to start talking about best practices. The year 2017, will reveal just how many best practices are being adopted on ground.
Privately, several developers admit that there is neither any incentive for them to adopt best practices, nor are there penalties for those who do not follow such practices.
Analysts point out that developers also face challenges in adopting best practices. Issues like multi-partner projects, inability of the developer to execute large projects because of their organisational limitations, personal equity versus project cost, lack of a competent team of vendors and high cost of finance, are some of the issues that force the developers to compromise professional integrity.
Recent policy changes that may boost transparency
Harjith D Bubber, MD and CEO of Rivali Park, maintains that 2017 may be a landmark year for the real estate sector, with the recent changes in policies and initiatives by the government, coupled with demonetisation and the Real Estate Regulation Act (RERA). With demonetisation, there will be less cash in circulation. This will have a positive effect for developers, who only deal in cheque transactions and this in turn, will boost transparency, he explains. “With RERA coming into effect, developers will have to disclose all the required details of their respective projects on public domains. This will help buyers to have all required information, before making a decision. Strict rules on timely delivery, prohibition on diversion of funds and other such rules, will encourage the adoption of best practices,” he adds.
Practices that can improve buyers’ trust in developers
JC Sharma, VC and MD of Sobha Limited, agrees that the general perception about the real estate market, is not very positive. Developers should strive to improve quality and focus on corporate governance, accountability and timely delivery of projects, he says.
“To win buyers’ trust, full-disclosure policies should be adopted, making all information regarding project approvals, registration and process easily accessible. Another practice that is still evolving and has gained the attention of leading real estate companies, is corporate social responsibility (CSR). Developers are also consciously striving to construct green buildings, to protect the environment. These practices, will not only strengthen bonding with various stakeholders, but will also help developers to win trust,” says Sharma.
Parth Mehta, managing director of Paradigm Realty, asserts that real estate developers have accepted new challenges, vis-à-vis managing multiple projects across cities, organisation of centralised process for the flow of materials and hiring qualified professionals for project management, engineering and architecture. “The influx of money into SMEs and startups across various sectors, will lead to job creation. Greater transparency thanks to RERA, higher GDP growth, salary growth and lower taxes, will boost spending and this will eventually lead to better affordability and timely project deliveries, by maintaining an equilibrium in the market,” says Mehta.
Nevertheless, the reality today, is that despite liberal payment plans and discounted deals in the market, people are yet not ready to trust the developers.
Home buyers expect an ecosystem that empowers them, with equal terms and conditions as those enjoyed by the builder. Developers, hence, may be left with no choice but to take lessons from streamlined markets abroad and introduce comprehensive disclosure norms. If this happens, 2017 can be a defining year, considering some of the key policy changes that being rolled out.
Home buyers’ main grievances against developers
- Most of the builder-buyer agreements are heavily loaded in favour of builders and the buyer does not get to see the agreement draft, till one has paid the booking amount.
- The home buyers’ disillusionment, is reflected in the rising number of complaints that have challenged the growth of the sector.
- Delivery delays, mismatch in area, changes in structure or designs in a project and developers going back on other promises, have been quite common.
(The writer is CEO, Track2Realty)