A recent KPMG survey has dubbed the Indian Real Estate Sector as the most corrupt.
This is mainly because, the transactions involve huge funds, approval processes are deliberately kept at several levels and are made complex and obscure (for example, Development Control Rule Books are difficult to find in the open market), land records are not updated, nearly everyone in the real estate chain of functionaries are corrupt, and there is heavy political and government intervention in the functioning of all departments connected to properties. Many of the recent scams involve the Real Estate- Adarsh Housing Scam, LIC Housing Scam, Sukna Land Scam and the horrible 2G Telecom Scam. This has exposed many top politicians and bureaucrats.
Real Estate is a state subject. Every state has its own set of rules for Real Estate transactions. Many of the rules are archaic and full of loopholes. Litigations are expensive and time consuming. Stamp duties and other levies vary widely from State to State. So it is very convenient for unscrupulous elements whether they are in the Government or outside, to hide their ill-gotten gains in the real estate black hole. To matters worse, such investments appreciate as well!
Remember the Securities Scam of 1992, beginning with Harshad Mehta, Hiten Dalal and company?
Fraudulent ready forward deals, fake bank receipts and price manipulation by abusing the Badla system had caused widespread losses of more than Rs 4000 crores, nearly brought the Bombay Stock Exchange down and paved the way for SEBI Act in 1992. National Stock Exchange was established in the same year and Badla system was abolished in 1993.While there were other scams caused by collusion of stock brokers and top management such as of M.S.Shoes, Rupangi Impex and Magan Industries, SEBI had brought in good controls and systems, so much that the Capital markets recovered, stabilized and started growing. FIIs of the world started flocking to our markets, once they understood that there was more transparency and clarity.
It is time for a similar kind of initiative to be taken in the Real Estate Space.
First there must be a committee to regularise and streamline the various laws governing the real estate sector. Rules and regulations must be identical across India.
Necessary laws must be enacted, archaic ones to be discarded and passed by a Parliamentary Act. Lokpal can really play a role here.
A Regulatory body such as the SEBI may be formed. Across the country, based on certain knowledge and experience level, brokers may be appointed. All real estate transactions must be through these brokers only. If these brokers deal in black money or if they encourage any black money transaction, their license must be summarily cancelled and they should be black listed.
Entire Registrar operations must be moved on to Nationalized Bank branches and all transactions more than 5 crores must be published in the website of the Regulatory authority.
All transactions in the real estate markets must be captured through a Satellite system such as what is being done by the Capital Markets.
The Regulatory Authority can have the day to day price movements of various categories of properties, across various property location be published in the website. This will not only ensure transparency, it will also facilitate professional to do research in market behavior. Once the markets are cleaned up, we can expect more and more professional companies to come into the market, thereby improving service levels for everyone, especially the end users
This is just a beginning. I request all like-minded people to modify, enlarge and deepen these thoughts.
[/list]
The tide is turning. The winds have changed direction. Like a smart sailor of yore, let us unfurl our sails and launch our ships.
Suresh
This is mainly because, the transactions involve huge funds, approval processes are deliberately kept at several levels and are made complex and obscure (for example, Development Control Rule Books are difficult to find in the open market), land records are not updated, nearly everyone in the real estate chain of functionaries are corrupt, and there is heavy political and government intervention in the functioning of all departments connected to properties. Many of the recent scams involve the Real Estate- Adarsh Housing Scam, LIC Housing Scam, Sukna Land Scam and the horrible 2G Telecom Scam. This has exposed many top politicians and bureaucrats.
Real Estate is a state subject. Every state has its own set of rules for Real Estate transactions. Many of the rules are archaic and full of loopholes. Litigations are expensive and time consuming. Stamp duties and other levies vary widely from State to State. So it is very convenient for unscrupulous elements whether they are in the Government or outside, to hide their ill-gotten gains in the real estate black hole. To matters worse, such investments appreciate as well!
Remember the Securities Scam of 1992, beginning with Harshad Mehta, Hiten Dalal and company?
Fraudulent ready forward deals, fake bank receipts and price manipulation by abusing the Badla system had caused widespread losses of more than Rs 4000 crores, nearly brought the Bombay Stock Exchange down and paved the way for SEBI Act in 1992. National Stock Exchange was established in the same year and Badla system was abolished in 1993.While there were other scams caused by collusion of stock brokers and top management such as of M.S.Shoes, Rupangi Impex and Magan Industries, SEBI had brought in good controls and systems, so much that the Capital markets recovered, stabilized and started growing. FIIs of the world started flocking to our markets, once they understood that there was more transparency and clarity.
It is time for a similar kind of initiative to be taken in the Real Estate Space.
First there must be a committee to regularise and streamline the various laws governing the real estate sector. Rules and regulations must be identical across India.
Necessary laws must be enacted, archaic ones to be discarded and passed by a Parliamentary Act. Lokpal can really play a role here.
A Regulatory body such as the SEBI may be formed. Across the country, based on certain knowledge and experience level, brokers may be appointed. All real estate transactions must be through these brokers only. If these brokers deal in black money or if they encourage any black money transaction, their license must be summarily cancelled and they should be black listed.
Entire Registrar operations must be moved on to Nationalized Bank branches and all transactions more than 5 crores must be published in the website of the Regulatory authority.
All transactions in the real estate markets must be captured through a Satellite system such as what is being done by the Capital Markets.
The Regulatory Authority can have the day to day price movements of various categories of properties, across various property location be published in the website. This will not only ensure transparency, it will also facilitate professional to do research in market behavior. Once the markets are cleaned up, we can expect more and more professional companies to come into the market, thereby improving service levels for everyone, especially the end users
This is just a beginning. I request all like-minded people to modify, enlarge and deepen these thoughts.
[/list]
The tide is turning. The winds have changed direction. Like a smart sailor of yore, let us unfurl our sails and launch our ships.
Suresh