A recent report published by Jones Lang La Salle Meghraj, says that the Indian real estate industry is fast climbing up on the transparency chart. The country"s tier 1 cities are currently ranked at 41 among nations surveyed, jumping nine ranks up from the previous survey done in 2008. The tertiary cities have graduated from the low transparency to semi-transparent status.
This is encouraging, considering that much of the world witnessed a slowdown in transparency in the last two years. Secondly, the Indian real estate industry, which was facing the heat of suspicion from customers and the fund providers alike, will definitely welcome the news. With large projects being planned, there is the need for better and continuous fund flow to complete and exit projects faster. Nine out of the 15 fastest improvers are in Europe, and the remaining six are in Asia Pacific - three from India and three from China.
Commenting on the achievement, Anuj Puri, Chairman and Country Head, Jones Lang LaSalle Meghraj says, "India"s real estate market is rapidly shedding the elements that were part of a less mature system. The increasing transparency levels are a reliable indicator that the country is adapting fast to the ways of the real estate business in more developed countries. Indian real estate is gaining swiftly in international credibility, which is boosting investor confidence levels."
Poonam Mahtani, National Director, Residential Research and Services, Colliers International adds, "There are still many issues to be resolved, yet the good part is that developers are making an effort to change. Reputed developers are spelling out the time-lines with a grace period in their agreement and also offering to pay penalty charges if they exceed the time-line. Many real estate companies are now becoming public limited companies and are happy to take full cheque payment. Pricing is standardising and they are getting international consultants on board which signifies a genuine desire to bring in professionalism and best practices."
Akash Deep Jyoti, Head, Corporate & Infrastructure Ratings -CRISIL Limited, almost quantifies the transparency levels as he says, "The level of transparency is improving within the real estate sector, particularly in west and south India. There is 100% transparency in certain pockets. While the developers are becoming corporatised, the customers are more informed."
This was inevitable considering the fact that India is working hard to join the league of global developed nations. Anuj Puri says, "Transparency in real estate dealings is an essential factor as the country gears up to apply international business parameters to local market activity. India is now considered a "threshold" economy and has outgrown the "developing nation" label, and expectations from both within and outside its borders have risen consummately. Adherence to transparency best practices in real estate business, -especially in terms of finance flows, documentation, execution and delivery are of greater importance now than ever before. The increasing transparency levels among organised operators will positively influence investor confidence and will have a ripple-effect on the unorganised segments of the real estate market."
Many reputed developers also confirm this view. Mr. Rajnikant S Ajmera, M.D. Ajmera Realty and Infra India Ltd says, "Today the sector is as transparent as any other industry in India. As more and more companies are raising finance by going public, they are required to follow the listing requirements and disclosure norms. Further, developers are also approaching the Private Equity Funds and other Financial Institutions for project financing. In such cases, transparency is the primary requirement. Most buyers too go for housing finance hence there is no question of any gray area."
Ajmera informs that associations like MCHI and CREDAI have made it compulsory for all the members to follow the "Code of Conduct".
This gives greater importance to transparency in dealings. They have a "Grievance Redressal Cell" for the consumers and are pressing fellow members to have clear dealings.
Manoj John, VP-Corporate Planning & strategy, RNA Corp says "Transparency in real estate is achieved when the customer is made aware or provided reasonable description of the approvals for construction and proof of land ownership, all cheque payment is accepted, actual carpet area calculation, components that are loaded to arrive at super-built-up area of apartment, delivery date, interest cost on delay (either-way), commitment on fittings and fixtures as per brands stated in sales brochure, commitment on facilities provided as part of development club house, garden / landscape / open areas, water bodies, parking as described. At RNA Corp many of these are a part of the company"s philosophy, many others are worked upon to include in our transparency policies."
R. Karthik, Vice-President, Marketing, Lodha Developers says, "We have been among the first developers to start full cheque payments and provide them with all the information that enables them to take a call, As most of the sales are done during development and launch the information starts with advertisements and at the sales office we offer other information regarding amenities, the sample flats, the procedures of payments of the installments. During the agreement we also show the allotment letter, approvals, carpet area and share the risk factors. The customers are informed. There is constant engagement regarding updates on project completion."
Anurag Singhvi, CFO, Lodha group adds, "There needs to be more transparency in the public limited space as investors are unable to decipher the real position of the real estate company. The transparency can be in the form of more information on sales, costs of construction and cash-flows during the period under evaluation."
Surely the real estate industry has come a long way, but we still have a longer way to go. Akash Deep Jyoti says, "There is still a wide disparity in levels of transparency among the developers. There is a need for an overall regulator, who should ensure certain minimum disclosures like area calculation, possession date, compensation and specifications. These should be spelt out in their marketing kit which includes promotional material on various media. There must be rulings on pricing based on quality of construction and amenities This will ensure a level playing field for developers and protection for small-budget customers. Further, going forward, markets will increasingly distinguish and place premium on the real estate projects of transparent developers."
Poonam Mahtani says, "We need clarity on approvals as to how many floors have been approved during launch, the land title, delivery time line with the possession date and the actual usable area, which is until now disclosed only in the agreement and not during the sale or bookings. She emphasises on the need for greater clarification in government"s rulings regarding different categories of development, which are not clear and often overlap causing confusion.
"Schemes like SRA and Redevelopment are constantly changing and the FSI rules too are changing without any notice and there is always a possibility that the developer would retain the plot to build another tower, which the end-user has not paid for. He has all the rights to know what he should be paying for and what he is getting in return," she says.
Mr. Ajmera agrees as he says, "There are few areas for more clarity. One of them is the "Area". Though all major developers are already mentioning it clearly, it has to be more widespread and followed by everyone in the industry."
Almost all of them agree that the status of the land is at the moment fudgy, leading to delay in conveyance. All these need to be straightened out for the rest of the things to become more transparent. The industry is working towards it.
INDIA"S TIER 1 CITIES ARE CURRENTLY RANKED AT 41 AMONG NATIONS SURVEYED IN TRANSPARENCY LEVELS
THE INCREASING TRANSPARENCY LEVELS HELP INDIAN REAL ESTATE IN GAINING INTERNATIONAL CREDIBILITY