How can real estate be real?

Housing sector initiatives in India - the beginnings. Housing as a priority was pushed to the front line in 1954 when the National Building Organisation (NBO) was set up by the Government of India for laying down plans and policies to promote housing to the homeless. The private sector got into the act in a big way when construction people set up real estate outfits eyeing the vast scope in the field. While the Government concentrated in providing budgetary plans through subsidised schemes, the private promoters and builders set their mind on providing posh apartments and luxurious living to the upper class. Market promotion Sales campaigns and marketing strategies came to the forefront, supported by glossy advertisements attracting the buyers. Banks and financing institutions stood in bee-line with schemes for providing loans on attractive and ‘liberalised’ terms. Some typical advertisements read thus: “Builders’ ads; Paradise regained in your new home; Luxurious living in nature’s lap; Buy an apartment and enjoy the facilities of a villa/resort; The address of royalty; The bank ads said, ‘Smart home loans,’ ‘No down payment,’ ‘Lowest interest,’ ‘No hidden charges,’ ‘Tailor-made facilities,’ ‘EMI as low as Rs. 499,’ etc. There have been hardly any who questioned the veracity of these ads. Tighten process As in many other cases, the administrators and law makers did not find any role for them in the field till things went wrong in the form of customer complaints, legal tangles, non-performing assets in banks, irregular constructions and so on. Even then, rarely there has been any direct confrontation with the perpetrators of the problems. Only the Reserve Bank came on the scene, through the banking system, to tighten the loan dispensation process. The proposed regulatory legislation too is yet to become a reality. Who is to ensure fair practices? There are many organisations of players in the real estate market, like the Ownership Apartment Promoters’ Associations at different State levels, Confederation Of Real Estate Developers’ Association Of India and the like. Code of ethics Some States have even enacted legislations, such as, Karnataka Ownership Of Flats (Regulation Of Promotion, Construction, Sale, Management and Transfer ) Act, 1972, and the Haryana Urban Development Act. It is reported that the Associations of Promoters/Builders have laid down code of ethics. State legislations have penal provisions against non-fulfilment of the provisions and rules laid down. In some centres, there are organisations of owners of sites and apartments working for protecting their members’ interests. If only all the Players and Regulators ensure implementation of rules and regulations and follow ethical practices, the real estate market can be a fair market. Further, the Government should not see the sector as a revenue spinner by raising the guidance value, cost of stamp duty and registration from time to time, escalating the cost, leading to unfair practices. Play fair If “real estate has to be real” each one of the players should play fair. The buyer should also value his money- even borrowed money. He has to avoid falling prey to the glossy ads and false promises, but does his home work well, before entering the field.

Interest rate reduction doesnt really excite consumers

A reduction in the interest rate announced recently by a few housing finance companies and banks and the possibility of others also following suit, with the festival season round the corner, could not be better timed. The slashing of the rates comes at a time when the real estate is going through a sluggish patch in the backdrop of the sharply rising land prices making middle class households increasingly feel that there is little for them to purchase. While representatives of the realty sector are happy about the reduction, as they feel that the move would revive customers’ interest, existing customers of most of the HFCs and banks who opted for floating interest rates feel that they are being discriminated against. This is because the reduction in the rates is only for new customers, in other words those who will seeking loans afresh. What this means to the existing customers is little respite from the rather sharp increase in the rates on their home loans in the last two to three years. Their demand for also being extended the benefit of the recent reduction is not without reason as many of them have seen the interest rates spiral from 8 to 10 per cent or even more. It meant either an increase in the EMI (Equated Monthly Installment) amount or the repayment tenure. Upward movement Sources in HFCs said most of the institutions were in the practice of revising the floating rate every quarter though for some quarters the movement has been only upwardly. While pointing out that the reduction could well mean the beginning of the end of the alarming phase with regard to the spiralling rates, an official of LIC Housing Finance Limited said the reduction is translating into more customers. As regards the decision of the institutions to apply the reduction to only new customers, the sources reasoned that it was not easy for the companies and the banks to do since they had borrowed their funds at different rates and at frequent intervals. It would happen only when the cost of funds for the institutions come down. In addition, they also inform that whenever reduction is announced it only means that the banks are only offering a discount on the floating reference rate (FRR) and the FRR itself is not cut. Hailing the new interest rates, N.Sairam of G.R.Natarajan and Co said the existing customers should also be extended the benefit. The new rates, he said, was one of the few heartening aspects for the builders in the backdrop of the rising cost of raw materials and escalating land prices. Attractive The need of the hour, according to Mr. Sairam, is an interest rate regime which is attractive to the middle class and affordable housing. The focus should be on making more people own dwelling units rather than catering to the high end of the society. M.K.Sundaram, managing director, Chozha Foundation, said the rates for new customers were not surprising given that the rising interest rates for the banks also meant many households putting on hold their decision to purchase. He said some of the institutions, particularly those based elsewhere in the country, were offering special rates to the customers of certain builders and developers. Mr. Sundaram said one of the scheduled banks recently approached him promising that it would offer home loans at competitive rates to his customers. This was a welcome initiative, he said, even while highlighting the need for the HFCs to give some respite to the existing customers on floating rate as well.

Home loan fair inaugurated

‘Find and fund your house’ is the motto of State Bank of Mysore’s Home Loan Utsav that opened here on Monday. A 50 per cent concession in processing fee is offered. Some 10 builders are showcasing their housing projects at the venue. If a visitor decides to choose one and seeks a housing loan for it, the bank would provide its home loan that takes care of furnishing, and registration costs, in addition to the cost of the house. The home loan can also be insured under ‘SBI Life’ for a one-time premium that is part of the home loan. Loans are available with a floating rate of 11 per cent interest. Actor Kumari Sachu inaugurated the utsav . The Bank plans to have two more home loan fairs that would be area-specific for the IT Corridor localities and in Anna Nagar. It is extending a concessional rate of interest and reduced processing charges to its customers for home loans till November 30, to mark the festival season. The fair is on till Wednesday at C.P. Ramaswamy Art Centre on Eldams Road.

Property transactions plummet in Chennai, suburbs

Data available with the Registration Department reveals that the number of property transactions in Chennai and its suburbs in Kancheepuram and Chengalpattu districts has come down substantially in the last two months. In May 2007, the number of documents registered in the five district registrar offices was 51,583. Of these, 80 per cent was property-related. In September, the volume came down to 36,748. Property transactions in the suburbs in Chengalpattu district, including Sriperumbudur that had the highest volume of transaction in the State, dropped by 30 per cent. The market has been experiencing a lull in the last few months. Senior Registration Department officials have been observing a slow-down in transactions, and the data compiled recently confirms this. A.V. Ramasamy, chairman, Builders’ Association of India’s southern centre, attributes the slowdown to the wait-and-watch attitude of buyers who, he reckons, are not willing to buy at the current prices. C.H. Gopinath Rao, former national president, Institution of Valuers, says property dealers had bought land at high prices. In some cases they had paid huge sums in advance. They don’t want to sell now as the prices are falling. He says the increase in guideline values is not a reason for the slowdown. They have been raised within the city, but remain well below the market value in the suburbs. The additional rise in property cost due to guideline values is only marginal. The property values went spiralling even after the revised guideline values were put up for public opinion in 2006. However, the revenue through stamp duty and registration charges has not dropped. The upward revision in guideline values, between 50 and 150 per cent, which have been in force since August 1, helped to stabilise the revenue collection.

Indra Nooyi’s new apartment

Indra Nooyi, chairman and chief executive officer of PepsiCo, chooses Poes Garden, Chennai as her new home. She recently booked an apartment with the KGEYES Residential Private Limited, one of the Chennai-based real estate and construction company. The website of the company describes Poes Garden project as a four floor apartment project with 4000 sq.ft apartment in each floor. When last visited, the website informs that two of the four floors have been booked.