“Nothing is Transparent in Real Estate” [Mar 2012]

CREDAI National President Lalit Kumar Jain opens up to Subhajit Roy and talks about the lack of transparency in the real estate sector and ways to tackle the inflow of black money
Mr. Jain, as far as the real estate industry is concerned, what depicts the transparency?Transparency hinges on two aspects: one is conduct of developers in dealing the business and another one is conduct of governance. The issue of transparency is based on the process of approval and this is where the whole issue crops-up. If the transparency processes have no red tapism and no corruption; then the delivery will be quicker, cost will be much less and the consumer will get delivery much faster. As per our survey delay occurs mainly due to the high bottlenecks in approval processes. These aspects need to be addressed under ‘Mission Transparency’.
How transparent is the Indian real estate sector today?In my opinion nothing is transparent. There is lot of scope for improvement in both the areas – conduct of developers and conduct of governance. In the last 6 months we have made sufficient progress creating uniform processes among developers and by the end of March 2012, we will be able to educate almost all the developers across the country who are our members. I can talk on behalf of CREDAI members who will practise the same system of sale and share the information to customers. 
Are you thinking of taking this initiative across the country?Yes. I have been travelling for the last 9 months to create awareness among developers and the government. We have come to a conclusion in CREDAI that by March all developers will sign the code of conduct individually whereby they will commit themselves under certain norms which will create transparency among customers.
Are there any other loopholes that make the industry less transparent today?There are various factors such as stamp duty rates, ready reckoner hikes in rates that make it non transparent. There are instances that even very honest buyers want to pay in cash because their budget does not permit them to buy unless they pay less on stamp duty or surcharges. Hence the revenue authorities should think whether any action will induce black money generation.
So, what initiatives are you taking to stop the black money generation into the real estate sector?Voluntary Disclosure of Income Scheme (VDIS) is one step to stop the inflow of black money. The time has come that people are made aware of black money system that it is not welcome anymore. So why not create one VDIS which can do two things – one is create revenue for state and second bring money into the system which will be productive rather than black money which is non-productive.
Could you outline the factors that are used to determine the transparency level?We need a conscious effort to remove the non transparent stigma; all the stakeholders have to come together and work towards it instead of blaming each other. Two things are very important one the governance system should improve and corruption should be removed in the approval processes.
CREDAI determines the transparency taking the inputs from developers, don’t you think there is a need for taking views from buyers as well?It’s a wrong notion that it is only from developers. In fact we have gone to consumers and advertised in cities like Pune and invited customers to launch complaints publicly. There have also been sample survey and we have identified the major issues that are grieved on and those issues are delay in suggestion and technical snag. Technical snags occur normally in 90 per cent of the cases when developers have given permission and improvised it but delay happens most of the times because of legal systems and non transparency. It differs from state to state, but generally all are same with certain per cent of degree.
What is your opinion on the recent sluggishness in the real estate demand?Mumbai and Delhi have got hit due to the global slowdown and sentimental impact; but if we see tier 2 and tier 3 cities, the rates neither got hyper escalated nor it slowed down and off-take was also quite stable. The effect which was due to the interest rate high was to the tune of 15 – 30 per cent city to city. However, Delhi and Mumbai got doubly hit due to the interest rate hike and secondly due to the economic situation across the globe.
If the interest rate goes down the consumers in most of the cities will come back in the market. I expect post April 2012 the interest rates are likely to come down. In the past 16 months the cost has gone up though the prices have not gone up.
Lack of transparency also distracts foreign investments – your comments. Also, what are your expectations from the government?If we really want to tackle this issue of transparency then it has to be tackled at the highest level of government because there are inter-departmental issues within central government like environment, civil aviation, defence, archaeology. There are also existing issues within state governments. Unless the Prime Minister himself takes it up as his mission, all these people can’t be networked and roped into one philosophy. So, our request will be that the Prime Minister takes it up as a mission and this will directly impact the consumers because they will get things cheaper between 10 – 15 per cent, it will increase GDP by 1.5 per cent and it will generate jobs which will be 100 per cent more in the sector. When the regime is clean, the foreign investment will automatically flow in and our estimate is that we will get 4 times more foreign investment than the current scenario. We have already written to the Prime Minister and are waiting for the approval.

 CREDAI Rides on “Mission Transparency”The apex body for private real estate developers Confederation of Real Estate Developers’ Associations of India (CREDAI) has envisaged ‘Mission Transparency’ initiative to promote transparent real estate transactions. By taking ‘Mission Transparency’ campaign forward, CREDAI members would like to practice internal discipline while adhering to the code of conduct that protects the interest of all stake holders especially the home buyers. CREDAI strives to achieve this mission by enforcing ethical business practices for building a credible real estate industry.
CREDAI has promulgated stringent code of conduct for the members’ compliance before assimilating them under the CREDAI banner and by following the best practices and with a self-regulatory internal discipline CREDAI aims at eliminating inefficiency in the system and process in the industry resulting in efficiencies of cost, quality and time.
CREDAI advocates exhorting all stake holders including the Government body for a single window, transparent approval mechanism which are expected to lead to faster acquisition of land, registration of land, statutory approvals and speedier service connections. With the ‘Mission Transparency’ drive CREDAI looks forward to establishing a relationship of goodwill and credibility with all the stake holders.

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