Thursday, March 29, 2012

CASH FOR FLAT

Corrupt real estate developers are thriving on lousy laws

If black money is the biggest predicament for the nation, the real estate sector is the biggest catalyst for the same. As it is an open secret that no real estate deal (particularly land deals) is virtually possible without black money. Not only we lack strong regulations to plug the loopholes, but also we allow the entire system to thrive through our existing laws. No wonder, in 2011, real estate was seen as the most corrupt sector during a survey by KPMG with 32 per cent of respondents agreeing to the fact.

I personally have come across many builders who put their property for sale even before they receive requisite clearances from the authorities. Most of the builders approach the regulators for clearances after the construction has begun. In most of the cases, a huge amount of transaction is being paid as cash in order to dodge taxes and other charges. Corruption and exchange of cash are just not confined between property dealers and customers but is omnipresent across the vertical. As around 50-odd approvals are needed for a property construction, a builder finds it faster and cheaper to bribe the officials than hopping from desk to desk. This is evident from the fact that all clearances if taken legitimately, would consume around five years. The root of the problem in real estate sector is that it is riddled with complex, ambiguous and multi layered laws that resemble the License Raj purple prose. The completion of projects takes much longer than it should, because the full circle from buying land to building completion certificate is painfully time consuming and hassle prone. The system is a perfect breeding ground of corruption. Taking advantage of these vague and complex laws, politicians and bureaucrats use their unrestricted powers to kick in favouritism.

With real estate facing cash crunch, builders have started redirecting bank loans to new projects. Builders usually take loans on new projects and collect booking amount from the customer and later use that money to purchase new plots rather than using it to conclude the project. Thus, bank loans are siphoned off for land acquisition rather than building constructions. Further, the spawning of nexus between private builders and housing departments often take dangerous proportions. Sometimes the flats are announced in localities which in reality do not exist at all! A NCR based private builder amassed crores of rupees by selling flats at NOIDA extension, which was revealed later, that no such locality has any existence in NOIDA! Often the flats are unfairly allocated to influential people that have extended undue favour or as bribes to the housing department officials. Delhi Development Authority is notorious and regular for such malpractices.

The amendments of such complicated legislative structures in real estate are the order of the day that must be replaced with prudent and transparent laws, which can curb high levels of corruption. Instead of having numerous laws pertaining to real estate regulation, the government should come up with one comprehensive and holistic law that covers all aspects starting from acquisition to development. Furthermore, the entire system should be automated with least human intervention. And the same goes for multiple permissions. One single form or portal should be developed for all clearance/paper-work purpose. This in long term will ensure transparency, clean records and above all would help clamping down of black money!

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1 comment:

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