Embedding ethics in Indian Real Estate Market
- Regulations February 15,2011
Worst enemy to the growth of Real Estate Business in India is the conventional and unethical business model that our so called “Street Dalal’s” are nurturing. This model is not only spreading bad breadth in Real Estate environment, but also promoting more corruption in the entire industry. Every other street corner is filled with uneducated, unethical and notorious middle man with no sense professionalism. What can and should Government do to remove this hurdle and help real estate business to grow strong in India? When will the current scenario change? One solution seems to be in embedding ethics in Real Estate Business though strong buyer cooperatives (or associations, companies, committees, NGOs, etc.) which have strong and transparent Govt. backup.
In real estate the government sponsored cooperative housing concept did proliferate during the sot years but it has since died down. In the US, buyers get together on the Internet and negotiate with manufacturers of televisions, music systems and other goods to buy nearly 40% cheaper. This concept can be applied to Indian real estate. In fact, given the state of affairs, it should be exercised by the buyer now.
The laws framed under the Indian Contract Act don't seem to apply to buying Indian real estate. The law says there has to be an offer and as a result an acceptance of the offer. Indian builders have this brochure where they print three columns.
Once home booking amount is paid to the builder then the builder will not offer you any receipt, which specifically states that the basic selling price is in so many rupees. It will be a verbal agreement between the builder and the buyer of the apartment.
The obvious idiot's question is that what is the consumer going to do if the builder accepts the cheque and later declares that the base selling price is not what was agreed upon but something quite higher. At today's arrangement, the buyer does not have anything in hand to support the reason why he / she took the decision to buy.
Further, into the agreement, the builder usually asks for the balance money of a fourth of the total cost of the apartment. That means the total cost of the apartment, divided by four and minus the booking amount. Again at this stage, no bit of paper with the builder's signature or company seal mentions that the money accepted is one fourth of the total cost of the apartment. If the builder asks for more money under the pretext of parking space charges or club membership charges then the buyer has no recourse left.
Considering the buyer only buys the apartment and is given additional benefits around it to make the deal sweeter, he is made to tolerate all kinds of nonsense when the apartment is sold to him. The first thing that he has to swallow is the concept of super area, where the total cost of the project is divided by the total covered area and the cost of the super area calculated.
For one thing, buyers in India prefer to be fleeced by the builders who do not offer them any consumer relief but weigh the entire deal towards themselves. They harbour an unconscious feeling that given a choice between uncertainties of having an apartment built by an association of poor, EMI (equal monthly installments) paying middle class people and buying an overpriced apartment from a greedy builder, they would rather be robbed.
First, combined buyer companies have to operate as profit making companies and not associations, which are easy prey to corruption and inefficiency owing to the very nature of no compensation being paid to the active players.
The members have to pay a substantial amount as membership fee, which would not be returned in totality in case of cancellation to ensure seriousness of the members regarding the project. Then the active leaders should start scouting for land and government schemes. This can also be complemented by looking for investors in the project who will get a return once the gestation period is over.
The project can house facilities such as health clubs, parks, restaurants, parking lots and cinema theatres , which will earn money and add to the revenue of the project. Each member can be treated as a shareholder and they can earn dividend as and when it is declared.
Some social networking companies and socially responsible models have already begun work in this area and are accepting memberships to fructify into long term projects on real estate. Once this movement picks up, nobody will be able to challenge the buyer's clout. He will come into his own on his own right and his own strength.
Let’s raise our concern towards unorganized Real Estate Business models in India and vow to bring Professional approach to satisfy customers at large.