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Needed: a real estate regulator to protect consumer interest

Land has become the final frontier of everything that’s wrong with India’s politics and business. It’s time to reform that — and my view is that it is in the politicians’ interest as well, writes Gautam Chikermane.

india Updated: Mar 28, 2010 22:54 IST

Lack of affordable housing in Mumbai. An industry known for operating in a non-transparent manner. Small-time crooks who ensure the buyer pays them an illegal fee through the builder. And zero accountability on contractual obligations of builders. Put them together and what you have is a recipe for perception disaster --- this quad has made builders look like the bad guys and politicians who make policies regarding land, its use and its sale, their protectors. Bollywood has added its sense of drama.

So, while moderating the the Hindustan Times Real Estate Conclave 2010 last week, I used the podium to bring all this out into the open. “Is there a builder-politician mafia operating in the city of Mumbai that is preventing affordable housing from reaching the masses?” I asked Maharashtra Minister of State for Housing Sachin Ahir. To my surprise, not only Ahir, but Vile Parle MLA Krishna Hegde, Rustomjee Builders CMD Boman Irani, Sunil Mantri Realty CMD Sunil Mantri and Lodha Group Managing Director Abhiseck Lodha were all ready to engage with the subject.

“This (builder-politician mafia) happens only in 1 per cent of the cases,” Ahir said. “Politicians are not in favour of any developer but for development.” Most of the cost of an apartment is land, said Mantri. That land needs to be freed, either by allowing builders to construct more floors or by linking far-flung areas with connectivity. “In five years, the government plans to build 200,000 affordable houses in Mumbai,” Hegde said. “In Hyderabad, rules are very transparent and the government helps developers provide houses for the masses,” said Irani. “That is not the case here.”

As in the securities markets, the answer, lies in transparency and regulation and the debate is now conclusively moving towards the formation of a real estate regulator. Two years ago, Maharashtra had initiated this process through the Maharashtra Housing Sector Regulatory Commission Bill, 2008. But there is still no sign of seeing it come to life. This followed New Delhi and NCR’s attempt two years earlier through the Real Estate Management (Regulation and Control) Bill, 2006. As we were debating the issue on the dais, in Delhi, Urban Development Minister Jaipal Reddy said the bill would be passed this year. We wait.

Builders have been either reluctant or indifferent. When I spoke to one of India’s largest builders a few years ago, he was downright dismissive. “We are already being regulated by 50 bodies, now we’ll have one more. All I will do is tell the legal cell to deal with one more agency.”

This cynicism will help neither the politician nor the builder— and certainly not consumers.

The only place where we can see the start of this much-needed, consumer-friendly reform is in Haryana, where under the Haryana Regulation of Property Dealers and Consultants Act, 2008, the onus has moved from consumers to brokers to verify the property involved in a deal and ensure it is free from any legal encumbrances, a licence is necessary to operate as a property dealer, and the developer-agent nexus comes under scrutiny.

Here’s what the regulator should do:

Regulate construction and re-construction activities.

Ensure that consumers’ interests are protected.

Bring in quality standards in the business.

Co-ordinate efforts to ensure digitisation of land records.

License real estate agents.

Serve as a single window clearance for all projects.

Land has become the final frontier of everything that’s wrong with India’s politics and business. It’s time to reform that — and my view is that it is in the politicians’ interest as well.

First Published: Mar 28, 2010 22:50 IST