It Will Help India To Become a More attractive Place for investment If International Rules and Norms Are Followed: Will Myles
RICS is the global professional body promoting and enforcing the highest international standards in the real estate, construction, infrastructure valuation, management and development of land. RICS’ entry in India is seen as an important milestone for the real estate industry which is in the dire need of raising the standards and adapting to the ethical practices. To know about these initiatives, BW Businessworld interacts with the leaderships- Will Myles, Managing Director, Asia Pacific & Nimish Gupta, Managing Director, South Asia, RICS.
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Government & consumer do recognize that what is required especially in the real estate industry is about the accountability, transparency and ethical practices. RICS’ entry in India is seen in terms of bringing these elements into the industry. What is your role and what is your take on the government’s role?
NIMISH GUPTA- I see that around reforms and regulations in a very appropriate industry if I may say so because this industry was dubious in terms of its own operation and in terms of transparency which could have gone into the dealings which happened not just at the top level but at the bottom level also. Government was supposed to play a very important role which they did very well by introducing RERA into the picture and by making sure that the real estate projects were regulated.
Having said that if you try and understand, I just read a couple of notes from the twitter yesterday where one person is saying that RERA should be developing more teeth. I mean, while intent is there, some of the people have still found ways to hoodwink the system, and given the tremendous volume which all RERAs are inundated with which I am very clear and very well aware of because of my interactions with them, there are challenges in making sure that those intent towards regulation and transparency are not happening to the effect which it was initially desired for.
So, there is a struggle which is happening in terms of making sure that RERA gets implemented in its true spirit and its complete entirety, and making sure that there is consistency across RERA platforms. So, there are 36 RERA bodies and we are talking each one of them. If they try and work differently than a national operator or national developer or a customer is actually facing two different systems over there and that is where I think it is important for people to understand that we need consistency in that as well.
So, while RERA was basically a state subject in terms of whatever national law was made but states have taken it up to themselves to create their own sub routines and some sub functions around that to try and manage the RERA implementation. So, now, there is a huge requirement to try and create a consistent level of standards of implementations of RERA regime, trying to put in some technology and proper data analytics at place so that the projects can actually be conducted in the original intent they were planned for. So
That’s something at RICS, we are trying to work with some RERA bodies to help them develop those, in addition to that we are also looking at accreditations of professionals to make sure that people who are working in the RERA bodies are basically not someone who just comes there and registers himself.
What is the mechanism now at the moment as you said somebody can literally get registered?
NIMISH GUPTA- So for real estate broker there is a prescribed format against which they can register and start working so that they can continue to work. But the bigger problem is not just the real estate transactions because this is where the start point of a transaction is and it is where the things go wrong. Bigger problem is around the rest of the stuff around architect and an engineer. How do they get defined? An engineer is defined as a person who has done his 4 years engineering course from an AICTE approved college. We know that what is the kind of employ-ability of the people who are coming out of our colleges, because of this, I would probably put it up that way. But there is a gap in their skill sets which an engineer should posses when he is coming out of an engineering college.
When you have such a loose definition around it, people are trying to ensure that they make use of that definition to their advantage and that’s where there is a further level of regulations which are required. I think with all true intent and all the urgency in place, most of the RERA bodies have understood that they are trying to put something in place to create a regulation standards around.
WILL MYLES- So, can I just add an international perspective on that? It’s great that the government’s top down approach is mandating a certain standards that is a good starting point. But a successful implementation has to cover the eco- system, the developers have to have certain standards, the professional services firms involved with the projects have to have certain standards and success lies in the whole eco- system. So that is to be the first point with these systems to support. What Nimish is saying that it is more than just skills? It is actually competency. And, one of the thing that we promote as we are an international benchmarking system effectively for competent behavior, for competent levels of skills for the built environment. Whether it is land and its valuation or whether it is competent structure whether it’s international or facilities that project management you need an independent assurance mechanism for competency.
NIMISH GUPTA- So, some of these RERA bodies are actually trying to develop a competency framework around it so they are trying to take our help because ours is basically the only globally applicable competency framework around the professional standard. What Will said and I think that it is a very valid point and very important one. Also, the financial agencies are also not identifying as stakeholder in the current RERA regime. They have a role to play, a very important role to play. They have certain levels of responsibilities and in the current RERA regimes these are not defined and that’s where it is very important to identify them under those regulatory practices.
Nimish has spoken about a score card which is about the state’s performance based on RERA. It intends to empower the consumer as the lack of such report is felt across India. How will you implement those initiatives across the States in India?
NIMISH GUPTA- So again you will have to have objective assessment systems which are neutral and unbiased and based on certain metrics which are properly measurable. So smart means Specific, Measurable Achievable, Realistic and Target Oriented. So, when we say these are the smart criteria against which you build a scorecard for a project, you will have to develop those criteria and this is something which we are trying to work with the RERA bodies to create those score cards. Wherein, they can not only just rate a project but a developer can also be rated around those criteria which can be developed along with.
Now there is a voluntarily approach required by developers also to make sure that when you get into a system and when you are looking at today’s world which is completely technological oriented and when the entire e-commerce is working on the feedback system, you also need to see that a person or end user is putting his life saving in a house and there has to be a feedback mechanism. So that this person gets a proper feedback on how this developer has been, how has he performed on other projects and how have his projects been? So, he can take a well informed decision and it’s not just a no longer decision around cause it’s a decision around quality too.
How long do you think you can make a score card for consumers as basically, until now, there is no such comprehensive mechanism as it will help the end user in a big way?
NIMISH GUPTA- Manish that would be an ongoing process. I mean because RERA is a state subject not every RERA would adopt that so, we might work with one and then rest of them will pick it up. But in terms of creating all those diagnostic analysis, all those data analytics which also go into it and all those systems which go into it, will not be a less than 12 months or 14 months exercise.
WILL MYLES - We have the toolkits. We provide the international standards- the RICS standards and we have helped them develop as we have collaborated with dozens of other international bodies. So one of the things that we bring to the table is that if valuation gets done. Does it follow international valuation standards? When you measure the property, does it follow the international property measurements standards? When you are looking at the cost, does it follow international cost measurable standards? Are you following international ethics standards? It will help India to become a more attractive place for investment if international rules and international norms are followed.
NIMISH GUPTA - In terms of what happens on the area statements right now there is one area statement or there is one area definition which has been given in RERA but there are multiple RERA definitions which are existing elsewhere now. When an international financial institution comes to invest either as an FDI or either as a fund into a project, he also needs to see something which he is accustomed to see. So, if he is accustomed to see a property measurement which is happening according to an international measurement standards he gets a lot more confidence. That’s where I mean the adoption of international property measurement standards needed to foster an environment, an ecosystem of making sure that the funds do get confidence and trust in what they trying to invest in.
What are your thoughts after the Government’s decision to cut down the GST tax on the real estate properties?
NIMISH GUPTA- I would like to give full marks to the government in terms of their intent in terms of what they wanted to do. But at the same time, I do know for sure that developers are trying to basically make sure that oh, I was trying to pass on the input tax already to the people which means either there is no effect on the net cost or it has actually increased. So, some of the developers have started taking an argument against this which is very unfortunate. Because, when the GST has got reduced to 5% the input tax has been removed. In the earlier cases, they were getting input taxes right. So what they are trying to say? I was about to set off my GST impact by then my input GST which was getting into it but today when I am on 5% I have no input GST which is where they are trying to fabricate as a pseudo cost parity or a cost increased kind of a scenario.
It is always important to understand as how RICS is bringing transparency, sustainability accountability in the real estate industry? If you could talk about some of the specific measures in India?
WILL MYLES- There are a number of measures. The starting point is that we creates the Schools of Built Environment campus here in Noida and Mumbai so that’s a part of building a profession bottom up and improving standards of skills and competency. Nimish is engaging with various government agencies to ensure that we get standards adopted and then in the middle we are working with all the major contractors in the construction space: the developers, the investors and the service providers to ensure that they have the sufficient assurance that the professional standards are being made.
Could you elaborate specific measures in terms of bringing transparency and ethical standards in the sector?
NIMISH GUPTA- In terms of trying to create competency framework around the people who should be employed and working alongside RERA in terms of project certification and things like and that’s number one. Secondly, identifying some diagnostics behaviour which can help RERA in terms of managing that. Thirdly, trying to identify situations where in you could actually create an alternate dispute avoidance system so that the loads on RERA which is quite heavy at the moment on complaint management or grievance handling could be minimised. It is like alternate dispute avoidance system- a parallel system that addresses the problems and try to resolve before they go to the legal way. That will reduce the workload on the system and create an assurance regime.
Block chain is seen as a game changer for the real estate industry as a whole. What do you think about?
WILL MYLES- Sir, my take on this is ultimately, block chain is database. It is more trustable database than previous types where the data can’t be changed and that’s fine. My take on this is though the digital representation of an asset on block chain can’t be changed, real assets change and the real world is always changing. So, yes, block chain will increasingly be used as a method of capturing information about projects time stamping and that’s completely immutable. But for that to work and make systems more efficient in many ways but there still needs the professionals to ensure that what’s in the block chain, it actually represents. What’s actually happening in the real world, so, we actually see block chain as an important enabler. So, in terms of the adoption of block chain, my experience so far is that it is an enterprise driven solutions which are having more success. So having a important stake holder who is dragging in a whole supply chain solutions and like that are having more success currently than (finding) solutions which are holistic, consortium based, trying to bring the whole ecosystem together and trying to change behaviors are very different tasks and a very difficult. The more success is being given by those who are one organisation driving the change process.
RICS talks about certifying 10 thousand surveys across India. Definitely, it will add up to the ecosystem in terms of standards and accountability. You have two institutions at the moment- Noida and Mumbai. How will you cover that and do you plan to diversify across India?
NIMISH GUPTA- Depending upon the scale at which the demand grows, there could be an opportunity of opening up such schools further down South. I mean, we want to make sure first of all there is an example which is created which I think we have reasonably done already at the moment. Our students have actually been able to go to the industry and create an impact in the industry in terms of their ethical behaviour and in terms of their professional behaviour. Given the demand which we are seeing from the industry, yes, there would be probably soon be a requirement of such school in the near term.
Real Estate Investment Trust (REIT) is finally here in India. How RICS is going to play a role into REIT in India?
NIMISH GUPTA- I am not sure if you are aware of it or not but we are actually formulating and we are in the last stages of formulation of our own Registered Valuer Association (RVI) which is basically under the new rules of MCA. IBBI has formulated certain rules under which all the valuers should get registered under RVI. With that valuation standards which RICS always has been advocating for the international advocating standards would come into picture. So when you talk about REIT there is already a talk about using IVS which is an International Valuation Standard and red book to follow the valuation principle which go into it