A perfect case for the investors - www.sumangalampropmart.com

Thanks to them who buy and rent out their flats, that lesser mortals like us can get a roof over our heads, argues Nitin Bali
By: Sumangalam Propmart
 
Jan. 15, 2011 - PRLog -- There might be real estate scams every day involving the Army, but when it comes to Army Housing Welfare Organisation (AWHO), it doesn’t allow its personnel to register with more than one scheme. So if both husband and wife are eligible for an AWHO scheme, only one of them can apply. “This is to stop people from turning into investors,” says a senior AWHO official. Is buying flats only for investment this bad?
If you believe a Noida-based real state consultant, buying houses purely for investment purposes must be banned. “Builders have their contacts with brokers, who have a ready stock of investors. Whenever a new project is launched, these investors buy out all the prime flats and the builder proudly proclaims 'Phase I Sold Out'! Here, the builder gets his bragging rights, brokers get their commissions and investors get their appreciation! It’s a win-win-win-lose situation where genuine buyers are left out as losers,” he says.
According to him, the main reason behind the artificial property demand-supply imbalance is the investor, who buys in pre-launch just for making a fast buck and exits the minute he gets good value for his investment. “Thus, he deprives the needy people from getting homes. This is as good as stocking wheat, rice, sugar, oil etc., in times of scarcity in warehouses and then black marketing them later.” He says in a country like ours, residential units should be rationed just like other essential commodities. “Homes should be declared essential commodity and they must not be allowed to remain vacant for investing purposes. Only then will greedy builders and investors stop blocking flats.”
Agrees a broker. “First-time homebuyers buying for their personal use should be encouraged and investors should be strongly discouraged to manipulate the prices,” he says, adding, “There has to be some regulation, like no tax incentives for buying second home through loan. Existing property holding should be declared at the time of registration and if found incorrect during verification, the mismatched property should be seized by the Government and auctioned.”
If you go by him, there could be higher property taxes for second home and so on. “There are thousands of flats in Noida and Greater Noida, which are lying vacant for years,” he says. “If greedy investors unblock them, people who are looking for ready to move in houses could buy them for a little less money. Banks must set different loan rates for the first loan, second loan and third home loans. This will definitely promote the genuine buyers and stop investors from buying flats purely for investment purposes.”
He doesn’t spare the builders either. “The builder should clearly advertise the rate of property in brochures and the same should be registered with the Government, too. Anything sold above that should attract criminal proceedings,” he concludes.
As much as we like to agree with them, there shall be people ready with a whole lot of jugaad to circumvent such rules. Second house in wife's name, third in dad's, fourth in some other benami name … and the list could go on. “Our policy makers don’t have the patience, vision or will to make good regulations in this industry,” says another property consultant. “If they have, the politicians will not allow them. Also, you will be greasing palms of the bankers to get loans approved in name of your distant relatives! Because whenever we put regulations and rules, the result only leads to more corruption,” he adds.
Another broker we talked to says price inflation is being caused by the greed of all real estate buyers and sellers, not just builders and investors. He says: “Why blame the investors? They are probably a small fraction compared to the hundreds of thousands of white collared 25-35 year olds, who suddenly find that 10 banks are offering them Rs 40 lakh loans.”
He says their favourite topic of discussion in social gatherings and parties nowadays is to discuss the square foot price in their area and how much profit their neighbour made when he sold his flat and became an overnight crorepati! “So they feel good when they hear that prices in their neighbourhood increased 50% because it means that the value of their own mortgaged apartment has now appreciated, even if they don't have any plans to sell their apartment.”
The broker says for most people nowadays, this is a sure-shot formula to become rich. “But we can’t just blame investors. To put it another way, most people buying an apartment are looking at their purchase as an investment, so all of them are investors,” he explains. Surely, real estate is one of the main drivers of our economy, and curbing investment will not help. At the most, some discount can be offered to the first-time buyer (but how to prove it? when the Maharashtra CM himself can get a MHADA flat in spite owning a house already). “The main issue is lack of transparency and money laundering,” says another broker. “It should not be that difficult to prevent black money, but then how will they convert lakhs of crores of rupees stolen through 2G and other scams into white?” he asks.
But one ground reality will always stand by: "If no investor(s) than no home to rent” and it is as simple as that. How are we supposed to find a home for renting when there is no supply? If one would not invest, how are we able to find homes for renting purposes? “We don't have a strategy in place where Government and developers construct communities solely for renting purposes, which is the case in other part of world. Unless something like this is not done, where will people stay?” asks another broker.
Thanks to investors, who buy and rent out their flats, people can get a roof over their heads. “Investors don’t tell real estate firms to hike prices. In fact, it could be other way round. May be because they are buying, so demand is there and so as is supply,” he argues. We can look at other options, like apply non-occupancy charges for keeping flats vacant. This will force people to give their flats on rent and investors won’t hold them forever.
More than the investors, it’s the speculators who are detrimental for any sector. “They book three-four flats in pre-launch offer and sell one by one as time progresses. These investors will be hit hard when five-year timeframe is put in place because not all have purchasing power to buy five flats in one stroke,” he advises. “They fund one flat by sale of older one and it is this chain, which needs to be broken.”

SOURCE: www.topfloor.in

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