The Real Estate market in India cannot remain immune to rankling negligence or disrespect of certain property matters for long. There is a need to take note of the areas of improvement in the legal aspect of the Indian Real Estate Industry. Among other things, self-regulation and information dissemination are critical to the current environment. The dynamics of this industry should be understood and respected but certain issues must be dealt with effectively and efficiently, like the following:
- Property Tax
People like to evade the obligation of paying Property Tax and pilferage is quite common. Hence actual charges are not collected. Property tax should cover infrastructure costs so that the user charges for water, sewage and electricity and other municipal services can cover the actual cost of delivering these services.
- Foreclosure laws
The incidence of foreclosures (the legal proceedings initiated by a creditor to repossess the collateral for loan that is in default) for the housing finance companies (HFCs) are relatively low in India, around 1.5 to 2 %. The foreclosure laws in India can still be revised to suit the current context as should the laws for non-payment of Equated Monthly Installments (EMIs) and consequent foreclosure and repossession of the property.
This will endow the financing companies with the final rights on the property, which is the collateral for the housing loan. Once enacted and properly enforced, it will further give a fillip to the housing finance business.
- Building Codes, Standards & Permissions
In many cities and States in India, developers have not complied with building guidelines and standards nor have the authorities taken much pains to implement them. The system needs to be made more transparent and direct, so that standards do not lack uniformity.
The staggering number of permissions and requirements in the construction industry calls for centralization, simplification, streamlining and transparency keeping corruption and time delays at bay. A Single Window Clearance for all buildings and construction requirements will not only go a long way in reducing time, paperwork and corruption at all levels but attract further investment capital as well.
Mandatory ratings of developers and projects by rating agencies in India like NAREDCO, ICRA, CRISIL have come to define building standards and codes, thus improving the quality of construction considerably. These agencies have served to safeguard the interests of the public and increase investor confidence.
- Foreign Direct Investments (FDIs)
Though FDI has been allowed in real estate projects with certain restrictive financial, time and area constraints but something must be done to encourage inflow of cheaper capital, access to low cost and long-term funds and evolve modern systems and technology.
Efforts in this direction include innovative financing schemes such as Real Estate Investment Trust (REIT), Real Estate mutual funds and mortgaged backed securitization that have made inroads with clear cut guidelines.
- Development Plan Guidelines
The City or State Authorities can use professionals to plan and execute all development plans for cities and towns. The Central And The State Governments must lay down specific overall guidelines for the City/Town Corporations and all regulations must be strictly enforced so that proper zoning is enforced within cities and towns, and infrastructure systems fall into place and are enforced strictly.
- Infrastructure
Most Indian cities are wanting in infrastructural facilities like electricity, roads, sewage, drainage, water supply as infrastructure fails to keep pace with the growth in population and development. The Central And State Governments must provide sufficient power, water and roads to cope up with the growth.
The intended modifications can make housing even more affordable for people. Sure enough, the regulators have been prompt in instructing lenders to increase the risk weight on their real estate lending. Also, lenders have been instructed against disbursing loans if requisite Government clearances are not in place.