The real estate sector is disorganised, despite being a major contributor to the country’s growth. The National Association of Realtors (NAR) in India, an affiliate of NAR Global, is working with the industry and government to introduce global best practices in the system. P S N RAO, chairman, National Association of Realtors—India, spoke to Nivedita Mookerji on the road ahead. Edited excerpts:
What is the NAR’s objective?
Brokers are the interface with the consumers. They provide advice, information and negotiate deals and, in short, make the markets. Unless this segment is reformed and elevated to global standard practices, investor confidence will emerge only with difficulty. Ultimately, it is the globalised investment opportunities in the Indian economy at stake and, on the other, the end consumers.
People seek good quality service and are increasingly willing to pay. Unfortunately, the trained human resource is not available in adequate numbers. NAR–India is registered as a non-profit national level association of brokers from all parts of the country. The objective is to streamline and promote the profession of real estate brokerage, so that we achieve transparency, accountability, fair dealing and ethical practices for overall good governance. In three years, the association has spread operations to 16 cities, with many more ready to join the reform movement.
Any lessons from your American parent body?
The NAR in the US is the world’s largest body of real estate brokers. Started over 100 years ago, it took them 35 years to bring systems, procedures and practices into operation. It also has a strong education and professional capacity building wing, and constantly equips its members with the tools and techniques to do business better. Disputes also get resolved with compulsory arbitration through the NAR conflict resolution board.
Ultimately, all these make for a better, consumer-oriented, business environment. In India, unfortunately, the industry is highly disorganised and we are yet to introduce modern business systems.
What are the main differences between the sector in India and that in developed nations?
The US, UK and other countries encourage systems such as MLS (multiple listing service), which make for seamless information exchange. The advantages are that the seller gets very high exposure for his property, the broker is assured of a mandate from the seller that all sales have to happen only through him, and consumers get more choice for better decision making. Listing contracts, agency agreements and brokerage sharing arrangements make for efficiency in business.
Even small Asian countries such as Philippines and Vietnam have started MLS. Also, the industry is highly regulated in the West and the state provides for licensing of realtors by way of conducting examinations and issuing licences through state boards, to be periodically renewed. The key carry-home message from the US experience is that organised real estate is a win-win for both industry and consumer. We need to learn lessons from global best practices and get the reform agenda rolling.
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The sector was recently ranked as one of the most corrupt.
It is perhaps the largest harbour for unaccounted money in India. The Paymaster committee, way back in 1960, reported the industry was mired in various malpractices. In 1970, the Wanchoo committee brought to light the fact that real estate is a major source of black money generation as well as absorption. Fresh in our memory is the Adarsh Society case or the Sukhna case. There have been umpteen such cases.
Is there any way the corruption tag can be removed?
The government, at the central, state and local levels, needs to bring in and strictly enforce laws which do not encourage black money generation, giving bribes for plan sanctions or doing under-valuation for tax evasion. A series of legal and fiscal steps need to be initiated. For instance, stamp duties in India are way higher than in most countries in the West. In Orissa, the stamp duty on property registration is as high as 14 per cent of the value of the property, whereas in most states in the US, it is way below one per cent. Obviously, tax compliance happens only when rates are low.
Some steps initiated by the government such as compulsory use of PAN numbers in transactions, introduction of a Unified Identity number for all citizens, etc, could go a long way in improving the situation. Many state governments have also initiated e-governance in property registration, plan sanctioning, which are welcome initiatives. However, we still have a very long way to go.
What are the biggest challenges?
The first is property title. In India, we do not have a system of the state giving a conclusive title to property ownership. The Justice Wadhwa committee recommended a long time ago that we need to introduce a system of property title certification, so that litigation on title does not stall progress. Many transactions and projects are stuck in the courts on account of this.
Also, town planning departments, urban development authorities, municipal corporations, state housing boards, water supply and sewerage boards, etc. all need to be modernised. The introduction of Real Estate Investment Trusts has been on the anvil for a very long time, and this needs to be expedited, so as to integrate the real estate industry with the overall financial system in a more robust manner. Besides, it is time we brought in a real estate regulator.
