Indian builders are presently a law unto themselves. Numerous buyers are hoodwinked by builders reneging on their commitments with impunity. Real estate is one of India’s most unregulated sectors where developers get away with almost anything. Many builders garner funds through pre-launch sales or by promising fixed returns on investments, acting more like NBFCs, although both practices violate norms.[1]
When end-users invest their entire savings to book a flat, they are promised possession within a year or two, yet may not receive possession even four or five years down the line. If a buyer fails to make any payment on time, he’s forced to pay penal interest ranging between 18% and 21%. But when builders don’t deliver on time, they only pay a benign rate of interest – and only if there is a penalty clause. If a property is resold, some builders also take exorbitant transfers charges – in cash, with no receipt provided – which can be as much as four to eight times the permissible transfer charges.
Naturally, end-users as well as investors are keen a real estate regulator is created to act as a watchdog and curb the rampant violations indulged in by builders. For the past two years, the Government has been promising to set up a real estate regulatory body, which is yet to see the light of day. Urban Development Minister S. Jaipal Reddy has now promised that a regulator will be in place by end-2010, to stop builders from “unnecessary profiteering”.[2]
Developers, though, have different alibis to resist regulation and protect their usurious profit margins: another level of authority will only lead to more delays, red tapism, and higher cost, which will ultimately be counterproductive for end users; unnecessary; will only challenge the competence of existing authorities, etc. The Government should ignore such vested pleas and ensure the real estate regulator is in place this year itself.
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