Invest In India

Managing Director, Royal Institution of Chartered Surveyors (RICS India)

The demon of impending economic doom refuses to die, and as tightened liquidity makes people put off larger purchases, the real estate sector is facing the worst attack because of high inflation and a severe liquidity crunch. The country’s growth estimates have been revised to well below 7%, and the effect is directly visible in the realty sector. Home-loan rates have been high and people’s investments have lost value at the stock market. This all comes at the worst possible time. Realtors overran their budgets and projects stalled, leaving skeletal structures dotting the landscape in big and small cities all over the country.

Experts and industry insiders believe that once the storm blows over, demand is bound to rise. Once this phase ends, land and property prices will be corrected to rational levels, speculators will be out, and the sector will have stronger fundamentals. However, there are some realities of the real estate business in India that needs to change. The following aspects need to be a reality in the years to come:

* The resource crunch and lack of skilled manpower and reliable information — There is a significant gap between international design practices and onshore construction realities for large-scale developments in India, characterised by the many challenges facing the development community today. These range from unprecedented demand for more and better buildings, shortage of local architects with international experience, project overruns, insufficient number of graduates to fill the growing need for skilled talent, consultant performance issues and slow adoption of Building Information Modeling (BIM), among other pressures. Initiatives will need to be taken to take care of this demand supply mismatch and our institutions will need to churn out curriculum to meet the demands of the industry, which are consistent with global standards.

* Uniform land laws — Currently land being a ‘state’ subject is under the jurisdiction of the local governments. There is a kaleidoscope of interwoven state, centre and local laws dealing with every parcel of land. This means that there are varying rules, regulations, standards, practices, from town to town across India. The simple concept of replicating ‘best practices’ from town to town across the country does not exist due to a fragmented legal framework.

* Quality safeguards — Real Estate projects will need to have 100% infrastructure guarantees. This means that all projects would have quality access roads, water, electricity, connectivity, safety and security. Our cities are bursting at the seams and given our pace of development, the shortcomings of meeting infrastructure needs are likely to widen. Thus, the projects that are likely to succeed in the future will be those that have quality in terms of basic infrastructure.

* Efficient land records — Perhaps the riskiest par of the real estate business is the lack of robust and reliable land records. If one were able to have reliable land records by 2020, one would have taken a huge step towards reducing the risk in the sector.

* Institutional mechanism to review professional standards — The need for application of valuations as a specialised discipline, regulated through a credible institutional mechanism set up under a statute, has been increasingly felt. There is a need for a fully articulated academic institutional and regulatory framework for this discipline. An institutional mechanism to regulate the conduct of valuation professionals as well as the qualifications and conduct of bodies certifying their expertise is equally necessary.

India Investment News, November 2008 from Financial Express