What's wrong with the real estate sector in India - The Economic Times
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Ravi Karandeekar
Jun 9, 2011, 8:36:17 AM6/9/11
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Paromita Banerjee is livid. Her builder has asked her to make illegal payments to seal her Rs 40 lakh flat purchase in Navi Mumbai. The 32-year-old IT professional, who has never given or taken a bribe, has to pay Rs 2 lakh for water and electricity connections, even though these are her entitlements. And an equal amount for a parking slot, even though the Bombay High Court disallows the sale of common area. All in cash.
All illegal. Her builder says he is helpless. He says he has to pay off officials in government agencies to finish the project and he has to stay on the right side of local politicians. He offers to help her save Rs 50,000 in stamp duty on registration by reducing Rs 6 lakh from her listed cost price. But then, Banerjee will have to pay Rs 6 lakh more in cash. Again illegal.
Banerjee represents a typical flat buyer in India. Her income is all 'white', but she is sucked into the 'black economy'. This has gone on for so long and it's ingrained so deep that it's become an accepted way of working for builders, brokers and even buyers. According to a survey by consultancy firm KPMG, 32% of respondents voted real estate as the most corrupt sector in India.
Niranjan Hiranandani, co-founder and managing director of the Hiranandani Group, agrees. " corruption is the highest in real estate and the government is aware of that," he says. "The process that asks a builder to take approvals from different agencies gives birth to corruption," adds Deepak Parekh, chairman of HDFC , the country's largest housing finance company. "Every stage involves malpractice."
All illegal. Her builder says he is helpless. He says he has to pay off officials in government agencies to finish the project and he has to stay on the right side of local politicians. He offers to help her save Rs 50,000 in stamp duty on registration by reducing Rs 6 lakh from her listed cost price. But then, Banerjee will have to pay Rs 6 lakh more in cash. Again illegal.
Banerjee represents a typical flat buyer in India. Her income is all 'white', but she is sucked into the 'black economy'. This has gone on for so long and it's ingrained so deep that it's become an accepted way of working for builders, brokers and even buyers. According to a survey by consultancy firm KPMG, 32% of respondents voted real estate as the most corrupt sector in India.
Niranjan Hiranandani, co-founder and managing director of the Hiranandani Group, agrees. " corruption is the highest in real estate and the government is aware of that," he says. "The process that asks a builder to take approvals from different agencies gives birth to corruption," adds Deepak Parekh, chairman of HDFC , the country's largest housing finance company. "Every stage involves malpractice."
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