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Investors,not genuine buyers,driving up new property prices

More than half of the new realty stock in India is held by investors,a sharp rise from 2009 when the investor segment formed only 22 per cent of buyers

Written by ENS Economic Bureau | Mumbai |
December 1, 2011 12:54:55 am

More than half (52 percent) of the new realty stock in India is held by investors,a sharp rise from 2009 when the investor segment formed only 22 per cent of buyers.

The data compiled by the real estate research agency Liases Foras shows that the huge investor presence has pushed up property prices making them unaffordable despite lack of sales volumes.

“The present realty market is capital driven rather than being consumption driven. The setting up of real estate regulator is a corrective measure that should have been taken eight years ago,” said Pankaj Kapoor,CEO of Liases Foras. He was speaking at a conference to discuss the implications of the new draft Real Estate (Regulation of Development) bill released by the Ministry of Housing and Urban Poverty Alleviation on November 9.

The Bill entrusts every state government with the task of setting up a three-member real estate regulatory authority and an appellate tribunal.

The stated purpose is to protect consumer interest through “regulation and planned development in the real estate sector and to ensure sale of immovable properties in an efficient and transparent manner”. No developer can start his project or even advertise it without registering with the authority. For the purpose of registration,developers have to submit every little detail ranging from number and size of plots,layout plan,carpet area and plinth area of the flats or apartments and even the facilities provided. To ensure transparency in the procedure,the developer has to enter all these records on the website of the regulator.

“The Bill reduces the bargaining power gap between developers and consumers,” said Mitesh Agrawal,vice-president of New Vernon Capital (Real Estate Investments). The model act also imposes severe penalty on developers who contravene any of the provisions of the act or fail to adhere to approved plans or promised project specifications. In addition to their names being included in the defaulters list on the authority’s website,the developer can also face imprisonment for up to three years or can be slapped a penalty which will be up to 5-10 per cent of the cost of the project.

Advocate Anil Harish,partner of DM Harish & Co added that the regulator will keep under check the unfair practice of selling flats on the notional super-built up area. “Buyers paying for 2,000 sq ft actually end up with only 1,000 sq ft thanks to ornamental additions such as lily ponds,flower beds,decks etc. … the real estate sector is already burden with a lot of regulatory issues but this particular regulation is entirely needed,” said Harish.

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