The real estate market has to change from one that runs on 'trust' to one that runs via trustworthy institutions.
FOR MOST of us middle-class citizens of this country, the biggest asset we have is a house–four-and-some walls which become a place where we not only invest our hearts and minds and emotions and aspirations, but most of our money as well. I’d imagine that 70-85 per cent of our total wealth is invested in a house. The rest is largely confined to safe government-backed schemes and insurance, and a tiny fraction is either wasting away in savings bank accounts, earning a pathetic 4 per cent, or circulating among shares, mutual funds and other financial instruments. Unfortunately, the real estate sector, which houses most of the middle-class wealth, is the least regulated of all these markets. Witness the contradiction: our most valuable asset is the least governed and the least valuable asset the most regulated.
If our stock broker cheats us of Rs 1,000, we can report him to Sebi (Securities and Exchange Board of India) or to the stock exchange–and expect to get justice. But if a property dealer charges us a Rs 50,000 commission (2 per cent) on the sale of a Rs 25 lakh apartment, and the property turns out to be disputed, there is nothing we can really do by way of seeking redress. Of course, we continue paying our monthly instalments to the housing finance company. If the property dealer charges us one month’s commission (at an exorbitant 8.3 per cent, unheard of in any rational market) on an apartment we want to rent out for a year, and the tenant turns out to be a rogue, the dealer is simply not accountable. We can do nothing, get nothing, hope for nothing. Why? Simply because there is nobody to go to, no regulator to file a complaint with, no self-regulated organisation to report this mishap. Yes, we can appeal to the courts–and pray that at least our grandchildren get justice.
Column in Outlook Money