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Thursday, 6 December 2012 - 3:01am IST | Place: Mumbai | Agency: dna

In the absence of a regulatory body to curb malpractices in the real estate sector, developers are easily creating a false sense of demand-supply gap and thereby jacking up prices. And in all this, some media reports have come to the aid of the builders.

If you are planning to buy your dream house, don't get carried away by the numerous surveys.

Knight Frank, a real estate brokerage firm, in its latest survey report said that Ulwe in Navi Mumbai, Chembur and Wadala will witness the highest appreciation in India and property rates in the city will not come down.

On the other hand, Liases Foras, a non-brokerage research firm, says 32,000 flats are vacant, which may lead to a correction in property prices.

Cushman and Wakefield says Mumbai needs 189,000 units in the next five years against the supply of 140,806. However, the state government's registration data shows that the sale of the property is decreasing each month, indicating a continuous glut in the market.

All these reports mislead people while buying, selling and investing in property.
"Instead of giving the right information, the reports confuse buyers," said Vinod Sampat, a housing expert.

He added that the government should curb malpractices and wrong information which is feeding agencies by forming stringent rules and regulations.

The real estate agencies' quarter-to-quarter survey report is nothing but a ploy to infuse positivity and inflate the market. "The reports cause a rise in the property rates. It is a trick used by influential developers with connivance of brokerage firms to paint a positive picture to hike the rates although there is no demand," Sampat added.

Conflict of interest
Most of the real estate brokerage firms such as Cushman and Wakefield, Knight Frank, CB Richard and Ellis, Jones Lang LaSalle and international firms branches across India are involved in brokerage activities as well as conducting surveys.

"It is difficult to come up with a neutral and fair survey report. Most of these agencies are committed to their clients (developers). And, they cannot go against their interest. If they start giving ground reality, then the highly inflated market bubble would burst," said Ramesh Prabhu, chairman of Maharashtra Housing Welfare Association.
Rule doesn't apply

Prabhu said these agencies' aim is to escalate property rates and reap benefits by fooling the gullible buyers.

"Real estate is the only market where the demand-and-supply rule does not apply. There is less property sale as per government record but realty prices are still soaring. In case there is no demand, price crashes. But it doesn't happen in case of property rates," he said, adding that all surveys are hypothetical and done on assumptions only.
Gulam Zia, executive director of retail, advisory and hospitality, Knight Frank, refuted all allegations, saying developers are not part of their survey even though brokerage is their core business.

"Our survey reports are authentic and not influenced by any developer or big land holders. We do not involve the developer in survey exercise. So, there is no question of conflict of interest. Survey of each agency is different because of different models and methodology used," Zia said, adding that they have a separate research team to conduct the survey and prepare the report.

"These reports are based on government agencies' data, upcoming projects under Jawaharlal Nehru National Urban Renewal Mission (JnNURM), generation of jobs, industry, locality and transport facility. After the report is prepared, it is sent to various experts, including urban development experts. Only then is the report published and circulated," Zia said.

Pankaj Kapoor, managing director of Liases Foras, said they are not into brokerage activities.

"We prepare reports for banks and financial institutions only. It is important to maintain honesty and reputation in the murky real estate market. As a reason, we have deliberately kept brokerage activity out. We are not committed to any developer. So our survey report is unbiased," he said. 

Modus operandi
Sources said some influenced developers and land holders, with their wish list, approach brokerage firms and agencies which prepare real estate report.
"The agencies put their machinery to work and come up with one report saying property in Boisar is in demand and another saying Ulwe will have high appreciation. There is no uniformity in their findings. Not even 50% data is similar. One survey report contradicts with the other. So, reports are made to fulfill a developer's demand to rejuvenate the dying market by giving wrong calculations," said Ramesh Prabhu.

A researcher in a reputed brokerage firm said that it is a dirty business but they have no other option but come up with false projections.

"We do not want to lose our bread and butter by giving the real figures. Therefore, the reports are fudged to suit the developer," he said.

Once the property rate goes up, developers sell the stagnant inventory.
"It is win-win situation for the developers and agencies at the cost of buyers. Buyers are influenced to put all eggs in one basket. Whenever the market is down and property is not selling in some areas, the agencies come up with a misguided survey report," said a real estate observer, requesting anonymity.

Media to blame
Atul Nemade, a real estate expert, said that most media houses have got a stake in the real estate firms. "Therefore, they do not want to give the real picture of the property market. They are always busy depicting the wrong picture by publishing high profile and isolated record transaction. And, the developers put the isolated 'deal' as a benchmark and start selling flats even though the product is inferior. It sets a wrong precedent," he said.

Nemade added that the deals suit developers, agency and media houses' vested interests. "The survey reports do influence buyers in their decisions," he said.
Prabhu said people should be cautious while buying property. "After reading reports, people rush to put money in the advised location. It inflates the property market even though there is no demand. It is a smart strategy by agencies and developers to misguide buyers," he said.

He advised people to read newspapers and not to rely on one study report. "They should study the ground reality and do their own assessment before buying property," Prabhu added.

Missing regulator
There is a need for the real estate regulatory body like Telecom Regulatory Authority of India and Securities (telecom) and Exchange Board of India  (banking/share market) to curb malpractices and control the unorganised sector.

"Genuine buyers will not be cheated and influenced to put his hard-earned money at the wrong place," said Sampat.

Sandeep Reddy, co-founder of Groffr.com, a brokerage firm, said there is not a single government agency that provides them data.

"We have to rely heavily on random developers for information. Government bodies such as Brihanmumbai Municipal Corporation, Maharashtra Housing and Area Development Authority (Mhada) do not publish and put their approval data in the public domain," he said.

Reddy added that it was difficult to visit every construction site within and outside the city.
"It requires huge machinery and manpower which can be done only by the government.

Therefore, lack of proper data causes variation in findings of each agency report. Once the government starts providing authentic data like in western and European countries, there will be uniformity and fairness in survey reports."

Prabhu said the state government recently passed the housing regulatory bill but it requires more teeth to control and address the anomalies in the market. "Stringent laws can stop manipulation of market and cheating buyers," he said.

The bill is in its final stage waiting to be signed by the President and buyers can only hope that it makes a difference in the real estate market.


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