Reform Realty

From the perspective of policy reforms in the personal finance domain, the last one year has been truly gratifying. Mutual funds, which were already customer-friendly products to begin with, have become more so with the ban on entry load. In the insurance domain, the new Ulip norms are expected to tilt the balance more in favour of buyers. Now it is time the spotlight of reforms was focused on that one sector where the customer still gets a raw deal -real estate. The boom and bust cycle in real estate over the last one decade showcased all that is wrong with this sector. Owing to the flood of liquidity from abroad and low interest rates in the country (which boosted demand), real estate prices started moving up in India from around 2002. Developers raised foreign money (via external commercial borrowings, FDI and private-equity investments) and within the country (from IPOs, banks and buyers) to buy land. But then they did not go on to build and deliver projects. Instead they bought more land, launched more projects, and collected more money. Amid the speculative frenzy that had gripped the markets it was easy to sell projects. Many developers over-extended themselves. They took on more debt and launched more projects than they could deliver on schedule. Then came the crisis of October 2008 and the accompanying liquidity crunch. Nearly all sources of funding dried up. Sales volumes dropped precipitously. Prices stopped rising and then corrected by at least 30-50 per cent. The aftermath wasn't pretty. Strapped for funds, many projects, even by leading developers, got delayed. Buyers filed cases in consumer courts, staged dharna in front of developers' offices, and formed online groups to apply collective pressure on developers to

This article was originally published on November 02, 2010.