- Industry players and property buyers expect the government to streamline the secondary real estate market in India
After being hit by demonetisation, the secondary real estate market in India has started showing signs of recovery. However, the industry and property buyers expect the government to streamline the market. A recent survey report by Grant Thornton, FICCI and Escrowffrr on Improving transparency in secondary real estate market shows that 47% respondents want the government to streamline the secondary real estate market to avoid paying high stamp duty and other taxes by making escrow mechanism compulsory. Also, about 40% feel that rationalisation of stamp duty and standard agreement will give a boost to the overall sector and bring in transparency.
Overall, the survey reflects a buoyant mood in the market as more than 90% of the surveyed property buyers believe that buying a resale property is better than buying primary property, as it eliminates the risk of delays and provides an opportunity to physically check and see the property being purchased.
The report further states that in 2017-18, about 72% transactions in Delhi-NCR were concluded in the secondary segment, while only 28% were concluded in the primary segment, which clearly exhibits weak consumer sentiments towards primary sale. On the other hand, cities like Bengaluru, Chennai and Hyderabad recorded on average 72% primary transactions, while Mumbai, Pune and Kolkata showed almost an equal distribution.
Commenting on the survey results, Neeraj Sharma, Director, Grant Thornton Advisory Private Limited said, “Consumer sentiments towards the primary market are feeble due to prolonged factors like delay in possession, lack of trust in developers and ambiguous pricing for services not opted. However, execution challenges and consumer confidence are subject to the upcoming general elections in 2019 in terms of policy-level initiatives to bring in transparency into the secondary real estate market.”
When asked about the common challenges faced while buying a resale property, about 74% of the respondents feel that while purchasing a resale property, background legal check is a major challenge. They also feel that they are more prone to losing their money paid to the seller in cash or cheque and majority (63%) of the respondents feel that an escrow mechanism can mitigate the apprehension. Another set of respondents reckoned that finding the right property at the right price is a challenge.
While concluding, the report recommends that government should focus on digitising of property records across the nation and build an effective escrow mechanism to bring in transparency and reduce litigations in secondary real estate market. The report further emphasises that there is a need to rationalise the tax structure by subsuming stamp duty as part of GST and government should look at bringing in a single licence fee for real estate agents across the country to match the global standards.
“This report, a first of its kind, makes a holistic pan-India assessment on various parameters in the secondary market. It identifies the direct impact of a regularised secondary market on stakeholders. A majority of the respondents have opined that formalisation in the market should happen which will further bring transparency and authority in real estate dealings and reduce litigations. This will also improve the ease of availability of financing options in the market. A major outcome of the survey is that the industry feels that transactions must happen through banking channels,” said Dilip Chenoy, Secretary General, FICCI.