‘Voluntary Codes Do Not Work’
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The litany of complaints by consumers against builders is unending. There is no penalty for delays; short-changing consumers in the name of ‘super built-up area' has become the practice. In this environment, the move by the Ministry of Housing and Urban Poverty Alleviation to enact a law to establish a regulatory authority and an appellate tribunal for the realty sector is important. Nick H. Thomlinson, senior partner and head of the London-headquartered property broking house Knight Frank was in Mumbai recently. He speaks to BW's Gurbir Singh about regulation and other issues. Excerpts from the interview:
Do you think regulation can clean up the mess in the Indian realty sector?
India should have a regulatory body. There are practices that are not ethical and the government should spell out the rules. It is only the government that can do it as we have seen voluntary codes do not work.
Is there a precedent for regulation? How is it in the UK?
Regulation is a function of the maturity of the market. The Royal Institution of Chartered Surveyors (RICS) is an apex body that enforces professional standards and ensures property transactions follow strict rules and guidelines. RICS is trying to go global and even has an Indian chapter. But ultimately, it is only a professional body.
Have property broking houses like yours had a cleansing effect on the Indian property market?
Our impact has been positive as we insist on ethical practices. Knight Frank and other international broking firms came in with the big MNCs. These companies wanted a comfort level they were used to in other markets. For instance, we have a global mandate with Aviva Insurance. We have some regional mandates, too. With the MNCs and their brokers, came international standards in property transactions. But it is still a long way to go. We (MNC broker firms) represent only 5 per cent of the property transactions, and that too in the metros.
Is the worst over in the international realty markets?
No, growth has still not come back. However, a lot of companies are using this period as an opportune time to consolidate; to move to newer and cheaper premises and lower their overheads. I would guess real growth would return only in 2010, that too probably in the latter half.
There have been reports of some pick-up in demand in the housing sector in both England and the US. What do you think?
England has been defying all the doomsayers. The second quarter of this year saw the slowing down of the fall in prices, and then from August we saw prices beginning to rise marginally. These are positive indicators considering nothing happened — there was a virtual freeze — between September 2008 and May this year. In the US, though there are some signs of activity, prices and demand are still not picking up from the lows.