The real estate sector in India, the second-largest job provider after agriculture, is expected to grow over 30 per cent in the next 10 years. However, despite being such a big sector, it didn’t have any regulatory mechanism for a long time. The advent of the long-awaited Real Estate (Regulation and Development) Act, 2016 or RERA is a welcome move.
Sections 9 and 10 of the Act cover the role of a real estate agent. It is definitely better to have some legal recognition, but in order to fix the power, duties and responsibilities of an agent or a middleman, a lot more needs to be defined.
The job of a real estate broker needs more recognition and more definition along with licensing and certification. Even on a conservative estimation, real estate broking is a Rs 18,000-crore industry with over five lakh real estate agents across the country. However, real estate broking in India is less than one per cent of the global size of the industry.
RERA does speak of registering the agents, but at the same time, leaves a lot of other issues unaddressed. Prima facie reading the said Sections of the Act gives the impression that it is only for the agents who are associated with the promoters or are involved in a sale transaction related to any new project. The scope of the Act needs to be widened to resale transactions and to lease or rental transactions.
The Act needs to cover real estate broking business in totality. While a lot of responsibilities have been attached and attributed to the agent, one needs to understand that an agent is a mere facilitator.
He is neither a part of the promoter nor is he an entity on whom a project depends. In such a situation pegging too much responsibilities on him would be unfair and counterproductive, especially when his own limited interest in the deal is neither safeguarded nor taken care of.
There are three independent parties in a typical new project sale transaction. One, the promoter. Two, the middleman (also known as the broker or an agent). Three, the buyer.
However, the Act seems to have considered just two parties in a deal with the agent being a part of the promoter’s side. In reality, often the agent himself is the sufferer party.
From the promoter’s side, an agent is asked to bring in customers, do a lot of leg work, parrot out the project features to prospective buyers and in the end, he is not even paid his legitimate professional fees quite often. On the buyer’s side, an agent is supposed to get the lowest price, do a lot of running around, do the due diligence too and at the end, often, the agent again is left without his legitimate fees.
All this happens when the deal is concluded smoothly. If, the deal gets concluded after some bumpy rides, the agent not only loses his due fees but is also blamed for the inconvenience. Hence, there is an immediate need to define the role and the fees of an agent when he’s representing the promoter, when he’s representing the buyer and also when he’s representing both.
A similar definition is needed for leasing and renting. Expectations from an agent are such that often he plays the role of a sales manager, that of a procurement manager, a registering agent and a arbitrator too, at times.
When representing a seller, a broker is also expected to play the role of a chartered architect to certify the technical aspects of a project to prospective buyers. Similarly, he is expected to play the role of a chartered accountant to explain tax implications of the deal. Why then shouldn’t there be a basic educational qualification for him?
In order to do so, there is a requirement for setting up a national-level body or an institute for real estate professionals.
Often, the terms agent, dealer, broker and consultant are used interchangeably for all those who are part of any real estate deal other than the seller or the buyer. The parties often don’t realise how widely different these terms are. There have to be different kinds of professionals for different kinds of deals. A professional dealing in land needs to have different skills from the one dealing in residential premises. Even in land deals, there are many micro specialities. The deal of an agricultural land is quite different from an industrial land or a residential land. These ambiguities would fade away once a national-level body of real estate professionals is set up. In absence of any recognised national-level organisation, local associations and communities mushroom up which often cause more harm than benefit to its members.
One of the most significant changes of the realty broking business in India has been the shift from being a dynastic business to a professional one. This profession which hitherto was carried out largely by non-professionals and the less qualified people is seeing the entry of highly qualified professionals today. Setting up a national body, especially for the industry professionals, would be a great boost for the industry and the economy.
A real estate professional needs four major qualities: Knowledge of the construction industry, knowledge of the law, knowledge of basic accounts, finance and taxation and the knowledge of sales and marketing.
A national body is required to produce, train and groom such professionals. It is worth noting that there are approximately 2.5 lakh chartered accountants and over five lakh real estate practitioners in India. While chartered accountants have an autonomous institute governed by an Act of Parliament none exists for the real estate sector.
RERA differentiates an individual from a company professing real estate broking and the registration fees of the two are also different. The Act doesn’t define the roles of the two. What if an agent is a company? Do all employees automatically get the licence to practise or only those in the company who are individually registered as real estate agents get to represent their principal company.
The issue is critical and needs to be defined beyond doubts. Only keeping a higher registration fee for companies wouldn’t be enough. The Act envisages an agent to register himself state-wise. However, a national registration is good enough for all states. Often, deals happen across two states. Or, multiple deals happen between the same parties across multiple states with the same agent. The Act should address such concerns too.
The Act should also define the role of the electronic media. The industry has witnessed a deluge of portals and social media pages which are neither authentic nor regulated. Same property is shown and sold across portals by different agents and ‘owners’ with widely different features. Shouldn’t the electronic portals selling real estate across the country also be registered and regulated under RERA?