The magnitude of reforms the real estate sector in India has been introduced with has put it on fast-track of globalization. The level of transparency and professionalism are improving substantially and the sector is abuzz with activity. In a freewheeling interview with Vikram Jethwani, Farook Mahmood, President of FIABCI-India Chapter and CMD, Silverline Group shared his perspectives about where the sector is headed. Here are the excerpts.
- After a series of breakthrough reformatory steps such as amendments in Benami Properties (Prohibition) Act, demonetization and RERA in the past couple of years, do you think the real estate sector is going to pick up this year?
It is the right step in the right direction that has been taken. The move is a positive one. The international community sees these new law as protection against investment here. This in the long run will help increase the economy.
Benami Act: The name of the Act alone has a lot to say in itself. Benami transactions are properties that are in the name of a person who is not really the owner. The Act discourages people from this practice and will also prevent future litigation under the Benami Properties Act. Benami properties were bought under two major categories. One is illegal political money. The second, though not illegal – legitimate land and money being used to buy properties that one would otherwise not be legal eligible, in a bid to circumvent the law. The amendment to the Benami will ensure that this will cease to happen.
Demonetization: This was a massive exercise conducted causing great amount of inconvenience to the nation. But the net effect of demonetization is yet to be seen. We do not have exact estimates of how much did not get accounted for. All of the money that was purportedly black money has found its way into the system. The move to curb black money may have been a good one, but not in the manner carried out and not at the cost of the disruption it caused in people’s lives. As an act, it was a courageous one but its achievement is yet to be ascertained.
RERA: If someone does not function on the agreed law, then imprisonment will be on the horizon. Now, if there is misrepresentation, there are consequences. This kind of accountability is a good thing. There was a time when a lot of things would be placed in the fine print and would often catch the consumer unaware. Builders used to be able to get away with just about anything. – a simple example being, clauses such as the penalty for delays. While a buyer will have to cough up around 24%, the fine print always works in favour of the builder who has to face of penalty of 8%. They would charge 30% to 40% for super built up area and a consumer had to accept it the way it was. So in my perspective, RERA is the best thing to happen to deal with such issues.
I personally would put RERA at the top in terms of good things to have happened to the real estate sector.
- Are you noticing any major paradigm shift in the overall way real estate sector in India is perceived, both at domestic and global fronts?
These acts RERA, Benami Act, GST etc will separate the boys from the men. And the real players will continue to be there because they are performers and they have the staying power. From the National level – speculative buying has come down and those investing in property for investment sake have dwindled. On the international front, all of these changes in the industry is encouraging – allowing for more investment. In fact, this last financial year has seen the highest investment in terms of FDI.
- Where does India’s real estate sector stand vis-à- vis its global counterparts?
While this is a vague question – an overall view would be that our markets are viewed globally as being good and vibrant. Our GDP is on the positive side and there is growth and I see our markets going to newer heights and I see positive days for real estate ahead.
- If you were to suggest the top 5 global best practices in India’s real estate sector, what would be those practices?
Transparency: The idea behind all the legislation coming in is to establish some ground rules in the sector to ensure transparency of transaction. Such practices are a boon to professional real estate consultants. A number of fly-by-night operators offer customers a range of discounts and offers that are not created in conjunction with the builder. This often ends up with the customer losing money and not getting what he has been promised. With the transparency such transactions are no longer going to be entertainment.
Accountability: With transparency of transactions, accountability at every level, across the board and hierarchy will be achievable. And that is necessary.
Rule of Law: Once again, with the right legislation in place, following of the rule of law becomes mandatory.
Disclosures: Upfront disclosures and fine print that is not convoluted or tilting in the favour of one party is essential.
One Taxation Policy: With the arrival of GST, the removal of the several and arbitrary taxes in favour of a single taxation policy is essential.
- Is it the right time to buy residential property, from an average homebuyer perspective?
Yes, it’s always the right time because today is always going to be cheaper than tomorrow. With inflation property prices will continue to go up.
- How has the new GST regime impacted the sector and the buyers?
There is a lot of uncertainty and people are unclear about input credits. While it is a good thing to have happened, it will take a while for clarity to come through. With GST, ideally there should be no other tax involved. You cannot burn the candle both sides. The input credit is an important factor that the consumer needs to understand and a developer will have to pass on in terms of benefit to the consumer.
- What is your viewpoint on the use of technology in India’s real estate sector?
It is very essential and required. But apart from technology, there is no denying the importance of human interaction. That first handshake can make all the difference. Technology in terms of support is essential but nothing to substitute the human factor that is very essential.
President of FIABCI-India Chapter (FIABCI is the International Real Estate Federation)
CMD, Silverline Group