Finally, after a decade-long wait, the Real Estate Regulation Bill is moving towards becoming a law. It has been passed by the Rajya Sabha and while it still has to be voted upon by the Lok Sabha, the obstructionist upper house was the real hindrance. The real estate bill has been a long time coming. I first wrote an article in January 2006 that the bill was about to be passed. In hindsight, it was really foolish to have taken at face value the government of the day's stated intentions of bringing errant developers to heel. Ten years passed by after that with the government making some ritual noises about passing this bill almost every year. Now, the bill is moving through parliament and will become law soon.
It need hardly be stated that incomplete housing projects where developers divert customers' money for other purposes is the biggest threat to people's personal finance. Those of us who comment on issues of personal finance and talk about other investments often forget that a house is often a family's biggest investment and the most valuable asset. A family could get everything else about money and investments right, and yet face huge financial problems if the money they pay for an apartment goes into a limbo. This used to happen relatively rarely earlier, but over the last decade, it has become a major problem. The reason is simple--the rise of an utterly unscrupulous kind of a housing developer, and the utter failure of the existing legal framework to do anything about it.
However, let us not fool ourselves that the mere existence of the real estate law on the statute books will foil the crooked developer. Even earlier, there existed enough laws, regulations and authorities that could have prevented much of the worst behaviour of developers. One reason is corruption and indolence in the institutions that are charged with preventing all this. However, an equally important factor, which complemented this systemic failure, is the utter recklessness with which buyers behave while taking real estate purchase decisions. This is actually quite a strange phenomena. I've observed a lot of people who will spend the time of the day arguing for ₹5 with a rickshaw puller or going to great lengths to get a twenty rupee discount on a packet of detergent, have given away great chunks of their money to obviously dubious real estate schemes.
Why does this happen? I suppose psychologists will have some answer but I find that when confronted with the prospect of buying an apartment or a house, some kind of a feverish frenzy ascends into the brains of many people. They listen to a salesman's smooth talk of swimming pools, premium spaces and 'global lifestyles' and sign away their money without basic checks on permissions, the on-ground situation and the developer's track record. What's more, many, many buyers overstretch their financial resources and buy more expensive apartments than they can afford. They are always swayed by hype about imminent increase of value, as well as a highly optimistic projections of how much they themselves will earn in the future. Culturally, a house is the most coveted possession, as well as the ultimate indicator of one's prosperity. Those selling these dreams understand this well and have exploited it skillfully. They are masters at creating a reality distortion field to rival the one that Steve Jobs was famous for. People buying apartments worth crores get focussed on superficial characteristics rather than thinking critically about value.
The real estate bill, even if implemented perfectly by every state (which is a highly optimistic notion) is no cure for buyers' follies. Buyers must choose a property that they can afford, one they will actually live in, and be hard-headed about double-checking all claims of the developers. They must actively monitor what the developer is doing, and try to be in touch with other buyers in a project. I'm sorry to have to say this, but the default assumption must always be that the developer and his sales agents are crooks. I know some aren't, but given the track record of this industry, that's the safety-first choice for buyers.
One day, in the future, the real estate bill will force India's real estate sector to clean up its act. However, we are still a long way from that time.
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