An article on why property prices are still artificially high in India was recently penned by R. Jagannathan in the Mumbai edition of DNA newspaper of Dec 18 2008. The opinions expressed were based on facts well researched and suggestions given by the writer were logical and well timed.
Several key issues in the article which are endemic to the real estate malaise plaguing this country were suitably addressed.
However one germane area that was missed out un-intentionally I am sure by the writer is the pre-meditated deception and fraud being perpetrated by the troika nexus of greedy builders, corrupt politicians and self serving bureaucrats on innocent buyers by allowing builders to sell apartments and real estate in India on the convoluted concept of super built up area.
More than the builders, I hold the bureaucrats & politicians responsible as they have turned a Nelson's eye to this deception to further their own vested interests. They happen to be passive investors and silent partners with the real estate developers. Without the tacit connivance of the regulators no real estate developer in India could get away with this brazen fraud. They (the regulators) have imposed grave injustice upon the hard working Indian citizenry by not bringing in suitable stringent regulations making it mandatory for all builders without exception to sell real estate only on the concept of carpet area.
Recent legislative amendment brought in on this domain several months ago in an allegedly progressive state like Maharashtra by the so called born again politicians & bureaucrats has been a complete eyewash and no more than an exercise in lip service. This alleged initiative was highlighted extensively in the media following the amendment to The Maharashtra Ownership Flats (Regulation of the Promotion of, Construction, Sale, Management & Transfer) Act, 1963, that made it mandatory for all builders to sell the flats on the basis of carpet area effective for all proposals submitted after May 12 of 2008.
Several grey loopholes have been intentionally incorporated in the purported legislative amendment that allows builders to charge once again on the super built up area (read as charge on areas that do not exist). And it is these politicians & bureaucrats, who are shameless and audacious enough in calling themselves the new Indian avatars & reformers promising Indians a new India and shouting from the rooftops of their ill gotten mansions “Bharat ko Badal Daalo”. What should be actually read in this message is “Corrupt politicians & bureaucrats ko Badal Daalo & unscrupulous builders ko Andar Karo”.
In a progressive country like Singapore, apartments and real estate can only be sold on carpet area basis and violations on this account attract enforcement of heavy penal provisions which act as a major deterrent. Builders in Singapore do not even entertain a concept of selling real estate on the concept of built up area. What is so unique about Indian builders that they cannot subscribe to this code of ethic? What happens to the concept of a level playing field when it comes to responsibilities of the builders? We all very well know the answer to this conundrum as there is no rocket science being practiced here.
To add insult to injury, each builder has become very creative in fermenting his own formula in the computation of the saleable area of apartments. The differential between the carpet & saleable area can be as high as 40%-45% and in most cases is not less than 25% anywhere in India. Is this not a fraud being committed with the blessings of the regulatory agencies?
What possible palpable justification can be given by the builder community for this deception of arriving at the saleable area when no other country allows this thuggery (concession would be too mild a word). A common grouse and crutch used by the builders is that real estate selling prices quoted on the basis of carpet area will become high stemming from a lower saleable area and may dissuade prospective buyers from buying.
This is nothing short of garbage talk. Markets in India as in other parts of the world are pretty well developed and matured. Prices at which transactions take place are always a reflection of demand & supply amongst other economic factors and I see no reason why real estate demand should behave any differently. Unfortunately the stark truth is that obese Indian builders have gotten used to unearned, obscene profits and are reluctant, almost defiant to see their golden eggs being downsized.
One sure shot way that I feel that this fraud can be immediately nipped is by all the pivotal lending institutions in India (ICCI, SBI & HDFC for starters) to take the initiative. All they have to is to come together and give a directive by way of an ultimatum to all the builders to pull up their act and tell them in no uncertain terms that funding will only be given on loan documents that reflect licensed architect certified carpet area and no other area will be entertained for loan disbursals. Why should the lending agencies agree to loan money on non-existent real estate defies logic? Aren’t they in a way enhancing their own risk exposure by allowing this deception? If the lending institutions switch off the money supply, the builders will have no option but to comply. After all over 90% of real estate transactions happen because of access to credit by potential buyers. Non-compliance will ensure that the builders get buried in their own unsold concrete inventories.
In the words of the English Preacher Santiz Frederick W. Robertson “There are three things in the world that deserve no mercy, hypocrisy, fraud, and tyranny.”
On another note:
The Hair Cut
One day a phool walla goes to a barber for a haircut. After the cut he asks about his bill and the barber replies, ‘I cannot accept money from you. I’m doing community service this week.’ The phool walla is pleased and leaves the shop.
When the barber goes to open his shop the next morning there is a ‘thank you’ card and a dozen roses waiting for him at his door.
Later, a hawaldar comes in for a haircut, and when he tries to pay his bill, the barber again replies, ‘I cannot accept money from you. I’m doing community service this week.’ The hawaldar is happy and leaves the shop.
The next morning when the barber goes to open up there is a ‘thank you’ card and a dozen vada pavs waiting for him at his door.
Then, a politician comes in for a haircut, and when he goes to pay his bill the barber again replies, ‘I cannot accept money from you. I’m doing community service this week.’ The politician is very happy and leaves the shop.
The next morning when the barber goes to open up, there are a dozen politicians lined up waiting for a free haircut.
And that, my friends, illustrates the fundamental difference between the common citizens of our country and our politicians.
By the way the above anecdote has been recited by me based on a similar inspiration I read somewhere written by anonymous.
I close for now and only hope I am not doing wishful thinking here.
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