NEW DELHI, 20 July 2018: Haryana Real Estate Regulatory Authority Chairman, Dr. K K Khandelwal today said that in order to bring transparency in the secondary real estate market, government must focus on digitisation of property records.
Addressing a FICCI conference on ‘Improving Transparency in Secondary Real Estate Market’, he added that digitisation will help in reducing the legal cost and process time thereby, building confidence among the buyers.
Dr. Khandelwal suggested that an online database of all the real estate agents across India must be introduced for better functioning of the real estate market and make it organised, regulated and transparent.
Mr. Santosh Kumar, Vice Chairman, ANAROCK Property Consultants Pvt. Ltd. complementing the RERA Act said that it has become a game-changer in the real estate sector and has boosted the confidence of the consumers.
Mr. Sudip Mullick, Partner, Khaitan & Co. in his welcome address said that several steps such as introduction of RERA, Benami Act, FDI by the government has not only reduced the overall property prices but has also brought back the buyers who shied away from investing in the sector in the past.
A FICCI-Grant Thornton- Escrowffr Report ‘Improving Transparency in Secondary Real Estate Market’ and FICCI-Pahle India Foundation Policy Brief on ‘Restructuring the Indian Secondary Real Estate Market were also released by the dignitaries.
FICCI-Grant Thornton-Escrowffrr Knowledge Report ‘Improving Transparency in Secondary Real Estate Market’
In India, secondary real estate purchase is preferred over purchase from the primary market because it is cost and time effective and, most importantly, there are no delays in
possession. In 2018, it has started showing signs of recovery from the time of demonetisation, and sales have started picking up in the last four quarters. Mostly, demand was witnessed in the affordable and mid-range housing segment. On the secondary luxury property side, demand has remained weak. Deal size has remained small, but there has been a positive momentum throughout the country. Another positive momentum was witnessed after the market got clarity on the applicability and accountability of RERA and GST.
However, Real estate transactions in India come with their own set of challenges. In the secondary market, the major challenges are on the payment side where a lump sum amount is blocked in the transaction process and the entire amount is at high risk. Cash transactions are another challenge, with sellers demanding payment in cash to avoid capital gains tax. Lastly, documentation or the legal vetting of property papers is a big challenge, with incomplete or unclear property chains.
The government’s focus in recent times was more on the primary real estate market, where policy-level initiatives like RERA, Benami Act, GST and demonetisation were introduced to make the sector more organised, regulated and transparent. However, no policy level initiatives have been proposed for the secondary real estate market. Based on the survey analysis, the report makes following recommendations for the secondary market.
1) The government should focus on digitisation of property records (titles/chain), which will gradually decrease legal challenges and reduce the overall process time.
2) In the GST regime, the effective rate of tax has increased from the earlier 11% (1% VAT+ 4% Service Tax + 6% Stamp Duty) to 18% (12% GST + 6% Stamp Duty). There is a need to rationalise the tax structure by subsuming stamp duty as part of GST.
3) An effective escrow mechanism will protect all related parties. While the money belonging to buyers and sellers will be safe, broking fee of agents will be guaranteed.
4) The government should look at bringing in a single licence fee for real estate agents across the country to match the global standards.
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