Tag Archives: Best practices in Indian real estate

Vicious circle & challenges of best practices

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Bottom Line: It is a known fact that the projects get sanctioned easily due to the bonhomie between developers and the authorities. And the quality of construction and other grey areas go unquestioned.

Best practices, Best practices in Indian real estate, Professional practices in Indian real estate, Builder buyer conflict, Builders cheating buyers, Builders harassing buyers, Homebuyers protest against builders, Consumer grievances in real estate, Consumer complaints in real estate, Indian real estate news, Real estate news India, Indian realty news, Indian property market news, Track2RealtyCompletion Certificate and the Occupation Certificate also have a price tag attached where the violations and flouting norms are conveniently ignored. Therefore, to the scores of financially and emotionally bleeding homebuyers the developers continue to bully with a gesture of “take it or leave it”.

Most of the builder-buyer agreements are heavily loaded in favour of builders and the buyer does not get to see the agreement draft till one has paid the booking amount. 
Their disillusionment is reflected with the rise in the number of complaints that has challenged the growth of the sector.

Delivery delays, mismatch in area, changes in structure or designs in a project and developers going back on other promises have been quite common. These issues have given rise to consumer activism, in courts and outside. The Competition Commission of India (CCI) slapping a fine of INR 630 crore on DLF gave some hope to the buyers.

Supertech also bore the brunt of buyers’ wrath when the Allahabad High Court, on a petition by its residents’ association, ordered demolition of two towers in its Noida project, Emerald Court. Builders like Unitech, Jaypee Group, Parsvnath etc are repeatedly being reprimanded by various courts for non-delivery of projects.

JC Sharma, VC & MD, Sobha Limited agrees that home buyers expect developers to be transparent in their dealings, deliver their units on time and with the best quality of construction. The general perception in the market is not very positive and that is why the government has introduced the Real Estate (Regulation and Development) Act. According to him, some of the best practices that the developers should adopt are improved quality, customer-centricity and transparency. It is imperative that the focus should be on corporate governance, accountability and timely delivery of projects.

“In order to win the trust, full-disclosure policies should be adopted, making all information regarding project approvals, registration and process easily accessible. Another practice that is still evolving and has gained the attention of leading real estate companies is Corporate Social Responsibility (CSR). There is also an increasing level of consciousness among the developers to construct green buildings in order to protect environment. These practices will not only strengthen bonding with various stakeholders but will also win their immense trust,” says Sharma.

Nikhil Hawelia, Managing Director of Hawelia Group suggests the existing perception can only be changed if the developer fraternity adopts practice of transparency and streamline their professional intent. Foremost the developer should draw a limit to the quantum of work that is under their control for a certain business cycle. The major concerns like delay in possession, quality issues etc directly or indirectly occur because of over-limit & uncontrollable growth, especially in the North region of the country. Involvement of higher management at all verticals is crucial to meet up the commitments and promises.

“The other aspect which causes huge gap between the developer and consumer is “insufficiency in being answerable to the customer”. Consumer connect is by and large a missing link in direct interface with home buyers. The developer should take extra care to face and answer all types of queries of the customer as well as third parties to gain the confidence of the market. Indian real estate has to go a long way vis-à-vis other global emerging markets as majority of the Indian developers are still not practicing the best,” says Hawelia.

An eco system that empowers the buyer with equal terms and conditions as those enjoyed by the builder will definitely change the outlook of buyers about the sector and its practices. Today, the reality is that despite liberal payment plans and discounted deals in the market, people are yet not ready to trust the developers. They have burnt their finger in the past due to various hidden clauses and arm-twisting after making the first payment.

By: Ravi Sinha 

Next: Indian homebuyers struggling for basic consumer rights

Baggage of trust deficit & best practices

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Bottom Line: Best practices could not gain ground in a business that has legacy of trust deficit over the years; the defaulters being bigger players and not just fly-by-night operators. 

Best Practices, Professional practices in Indian real estate, Best practices in Indian real estate, Professionalism in real estate, Builders cheating buyers, Homebuyers protest against builder, Consumer grievances in real estate, Consumer complaints in real estate, Builder buyer conflict, Track2Realty There are scores of cases being fought by homebuyers in the consumer and civil courts. As a matter of fact, real estate complaints are among the top four legal issues in the country.

Most of the cases are not against the fly-by-night operators but industry’s untouchable top-tier – the likes of Jaypee Group, Unitech, BPTP, Emaar MGF, Parsvnath, Supertech and DLF.

Even when the court rules heavy compensation or a refund, the case just proceeds on to a new hearing. And the average home buyer then has nowhere to go, except camp outside the developer’s office or house, get shunted out by his bouncers and then be slapped with an allotment-cancellation letter for raking up the issue publicly.

In the last few years of the real estate slowdown, when the respective courts have snubbed the builder bullying time and again, the home buyers are yet to hear from these behemoths about how they plan to kick-start their stalled projects or how they plan to compensate their thousands of allottees for the emotional and monetary distress they have caused. If they are unwilling to self-regulate, when and how will the buck stop and with them?

Ground realities 

Delivering promises made in terms of Quality, Amenities, Time Frame, Carpet Area etc pivotal to best practices 

Failure of judiciary to deliver timely justice compromises best practices 

Developers admit best practices neither earn incentive nor penalty 

Internationally recognised and locally relevant best practices such as common area measurement and valuation standards can lend credibility to Indian realty 

Builder-buyer agreements are one-sided; more often than not buyers get to see the document after paying the booking amount 

CREDAI Chairman takes moral high ground on the need to change; does not initiate any action against erring builders

Best practices demand formation of Society and executing Conveyance Deed within stipulated time frame from the date of Occupancy Certificate

Naushad Panjwani, Managing Partner with Mandarus Partners LLP agrees that Indian real estate faces trust deficit. This was prevailing on a rampant scale and developers got away scot free, largely due to absence of an effective Regulator like in other sectors (SEBI, TRAI, IRDAI etc); scarcity of organised funds for projects; nexus of developers-politicians-bureaucrats; and poor rate of disposal by courts plus lack of title insurance.

“These factors kept good business houses away from this sector. And hence the industry was characterised by many unscrupulous elements. For such developers, governance, customer care and reputation were least of the priorities. Things have started to change slowly. With RERA, easing of funds in the form of REITs, ECBs, FDI have attracted the attention of reputed business houses and customers alike,” says Panjwani. 

The industry body Confederation of Real Estate Developers’ Association of India (CREDAI) has thus far failed to act against the erring builders. They had only been vocal with a resolve to suspend the members who have repeatedly gone back on promises to buyers.

Chairman of CREDAI, Geetambar Anand defends inaction saying that at least the sector has realised that they need to start looking for answers within their own firms. He nevertheless agrees, “There has been mismanagement. It is unfortunate and bad luck that people made wrong decisions. So, they ended up earning a bad reputation. Without having the intention to cheat people, why are you branded a cheat? So, they want to rethink this and redo things the right way so that such things do not happen.”

However, such innocent excuses do not cut ice with those who have lost their lifetime savings plus an additional burden of EMI to the banks. CREDAI has 11,500 members across India, and the clarion call of its President Geetamber Anand to clean the mess and bring back confidence in buyers’ minds has not gained ground.

Similarly, no one has ever heard of the much-publicised entry barrier to become a CREDAI member. It was earlier proposed that the member must have delivered 1,00,000 square feet of area and get recommendations from two developers who are already members. Also, the consumer grievances redressal forum under CREDAI is yet to win the trust of the home buyers.

“The realty sector earned a bad name because of some developers. We need to enforce discipline among our members and ensure a code of conduct, clearly specifying commitments and penalty provisions. Only developers who are serious about their business will be part of CREDAI now…. We are trying to bring in transparency and bridging the communication divide between buyers and developers,” Geetamber Anand had earlier said. This was never followed in practice.  

By: Ravi Sinha 

Next: Vicious circle & challenges of best practices 

Miles to go for best practices in Indian real estate

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Bottom Line: The understanding of best practices is very archaic in the Indian real estate. The intent is even more conservative and hence Track2Realty observes that the sector has miles to go before they can look forward to adopt some of the globally accepted best practices.

Best practices, Best practices in Indian real estate, Professional practices in Indian real estate, Cheating in real estate, Builders cheating buyers, Consumer complaints in Indian real estate, India real estate news, Indian realty news, Real estate news India, Indian property market news, Track2Realty, Track2Media Research“Once the customers become captive, the builders start fleecing them. I have already held in the case of DLF that this conduct is called ‘after market abuse’. This is a fit case of abuse of dominance by the opposite parties,” said CCI member R R Prasad in a dissenting order 

FIR against Vatika Group MD, three others on fraud, cheating charges 

Orbit Corp MD Pujit Aggarwal arrested by EOW in Rs 52 crore cheating case 

Manesar land scam blew lid off government nexus with private builders 

Mumbai’s ‘One Avighna Park’ builder Nish Developers booked in INR 2,000-crore fraud case 

ATS, Unitech, Amrapali among the biggest land defaulters to Noida Authority 

Supreme Court snubs Supertech asking the builder to “sink or die but pay back the buyers” 

Unitech mired in litigation in at least five forums—Company Law Board, NCDRC, Supreme Court, High Court and also state consumer forums 

CCI orders probe against Jaypee Group through majority orders in two separate cases involving real estate projects in the national capital region for alleged abuse of dominant market position and imposition of “unfair” conditions on buyers 

Noida builders flout norms, ‘use ground water for construction’ 

What would you make out of a business where the above headlines continue to haunt the home buyers on a routine basis? While the overt consumer activism, social media outcry, media trial and judicial intervention forced the sector to change its tune to Best Practices on the face value, there is a chasm between the lip service and the practices on ground. It seems the developers’ comfort zone lies in to operating in the dark age.

The developers are by and large living in denial. The deep rooted psyche is that once the market conditions improve the buyers have no choice but to run for an asset class that is not only need-based but also a business where the demand far exceeds the supply. This medieval thought process is in fact the biggest roadblock in the way of best practices gaining ground in the Indian real estate.

Best practice is something that the sector never bothered to adopt. But the slowdown and nose diving sales graph are clearly indicating that the developers have no choice but to stop sulking and blaming market conditions for poor sales and start accepting the hard truth.

The buyer today has lost all confidence in developers. The only way this can change is by simple changes the developers make in their business practices that will bring that confidence back. Before they expect market conditions to change, they have to change their own outlook first.

Privately some of the developers admit there is neither any incentive for developers to adopt best practices nor are there penalties for those who do not follow such practices.

A section of analysts also point to developers’ facing challenges in adopting the best practice in the sector. Issues like multi-partner projects; inability of the developer to execute large projects because of their organizational limitations; leverage on finance – personal equity versus project cost; delivering large projects without competent team of vendors; and huge finance cost are some of the issues that force the developers to compromise the professional integrity. 

Devina Ghildial, former MD, South Asia – RICS points out that the success or failure of any real estate and construction project can largely be attributed to money, material, manpower, machinery and management. The collaboration of these factors along with effective project management that encapsulates planning, scheduling and budgeting are critical to project delivery. However, the real estate and construction sector in India for long has been fraught with several long-standing issues such as adequate reforms, coupled with changing market dynamics that pose as bottlenecks in project execution. Liquidity concerns, rising costs and lack of specialized manpower are just some of the challenges that developers have continued to grapple with.

“With the evolution of a global marketplace, international property markets have become intrinsically linked and there are international consequences to consider. Then there are also local factors that affect the performance of the sector. The future success of the Indian real estate and construction sector lies in its ability to regulate its operations and professionals. It is also widely felt that awareness and introduction of internationally recognised and locally relevant best practices such as common area measurement and valuation standards can contribute towards uniform practices and lend quality assurance and credibility to the sector,” says Ghildial. 

By: Ravi Sinha

Next: Baggage of trust deficit & best practices

Indian homebuyers struggling for basic consumer rights

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Track2Realty Exclusive

Bottom Line: While the matured property markets are adopting evolving best practices, the Indian market is not offering even the basic consumer rights to the homebuyers. 

Homebuyer Confusion, Confused homebuyer, Homebuyers grievances, Homebuyers' legal options, India real estate news, Indian property market news, Track2RealtySome discussions about best practices in the Indian real estate has started because today the investors also do not want their money to be locked in an asset that is neither growing nor is likely to get delivered. Worse even, there is no authority or court in India that has been successful in getting a stalled project restarted or in forcing a bankrupt builder into selling his assets to compensate his allottees.

AS Sivaramakrishnan, Head – Residential Services, CBRE South Asia maintains that product quality and product delivery, along with pace of construction, are becoming the current key words in customer satisfaction for home purchases. Especially with the implementation of the Real Estate (Regulation and Development) Bill, these practices will become even more important for development firms to keep in mind.

“A key area of differentiation between mature global markets and the housing market in India lies in the fact that all aspects of developing and maintaining a residential project are handled by professional firms, unlike the case in India. Developers should increasingly focus on their product rather than on marketing paraphernalia, which will help in controlling market perceptions,” says Sivaramakrishnan.

Vineet Relia, Managing Director, SARE Homes feels transparency, fair norms and delivering on promises made either verbally or in the builder-buyer agreements are imperative to change negative perceptions. Moreover, instead of a commodity-selling approach, developers should adopt a value-based, professional approach that keeps customers fully informed about all the benefits of investing in a particular project. A professional approach can ensure all unique project propositions – location, amenities, pricing, after-sales service and other salient points – are made crystal clear to customers. Transparency in all dealings and practices is required to transform perceptions about the Indian real estate industry.

“Best practices in Indian real estate were majorly non-existent, until recently. Moreover, each market has its own drivers and challenges, which differ from other markets. Comparisons can therefore be odious and misplaced. But the best practices used by a few professional developers compare favourably with the best globally, including that in emerging markets. But consistent performance, proper pricing of products and excellent service at all times – before, during and after sales – can play a pivotal role in the success of any developer and such practices are bound to gain ground in the days ahead,” says Relia.

The need of the hour is to take lessons from streamlined markets abroad and introduce comprehensive disclosure norms. For instance, US home buyers are entitled to receive a number of disclosures during the course of the house purchase.

These disclosures give a homebuyer a somewhat transparent and fair picture of what he is getting into. On the other hand, Indian home buyers sign agreements that are one sided. They even get unpleasant surprises in terms of hidden costs.

Analysts believe bulk of the challenges or the evils can be addressed if the RERA is implemented sincerely and effectively. The judiciary is getting more and more conscious and discharging consumer related cases quickly and in most cases with a consumer protection mindset.

While the homebuyers in mature markets may be having a level playing field, the Indian buyers are struggling for the most basic consumer rights. The demands of the buyers in this part of the world are not very unrealistic.

Some of the common issues are: 

Title assurance and right to see all approvals in place

Rates based on carpet area

Right to a full refund within 30 days of booking

Equal penalty for delay in completion

No change in area bought

No hidden charges or escalation charges

Separate escrow account mechanism

Free first transfer

Fair agreements with indemnities for delays, poor workmanship etc.

Open and transparent communication throughout the project period

These are not very unreasonable expectations and can be achieved without any extra burden, if only the developer is committed to adopt best practices. However, that is easier said than done and Indian real estate has a long way to go before we claim to be at par with the developed countries.

There is a lot that needs to be done at government level as well to instill confidence in homebuyers. Land titling, title insurance, quick judicial remedies, standardisation of numerous norms etc are areas yet to be addressed.

By: Ravi Sinha