Real-estate prices in India, which are already reaching for the stratosphere, are being further fuelled by a set of vested interests such as established brokerage firms and leading media houses through reports which exaggerate demand and suggest that realty prices may go up even further.
Meanwhile, angry investors are struggling to get the regulators to act quickly and decisively to dampen the price escalation.
Recently, ICICI Securities released an all-India survey (across eight cities) which was headlined—‘Affordability not a concern—healthy demand for homes at current prices: ICICI Securities survey’. A closer look suggests that things are not so rosy.
In fact, apart from vaulting prices, potential property buyers are outraged at how they are being cheated with regard to the actual usable area that is being sold to them. Moneylife has already reported on how the loading, which used to be anywhere between 20% (built-up) to 40% (super built-up) has now been pushed up to as high as 80% by several builders in Mumbai. With the government showing no signs of setting up a property regulator, builders and developers clearly feel confident that nobody will check their dubious selling tactics.
Another factor that has increased prices in Mumbai is the loading of taxes (in form of value-added tax (VAT) and service tax) on the already high price being forked out by consumers.
A research report circulated by ICICI Securities says that Ahmedabad has the highest inventory of 59%, Chennai has inventory of 10% while Mumbai has an inventory of 8% and National Capital Region (NCR) has only 1%. However, property experts are sceptical about these numbers. “It is a doctored report to show optimism. In fact, Chennai represents the least inventory and Mumbai & NCR the maximum. I am surprised to see such a false picture being painted by one of the credible brands,” said Pankaj Kapoor, founder, Liases Foras.
For many media companies, headlines that point to property prices rising even further, usually translates into increased advertising revenue. In some cases, they have equity deals with realty companies which include an agreement to project reports that favour these companies. A reader has written to point out that some of these headlines sound like “quotes from the builder”.
A senior executive of a leading information technology firm has even been writing to the governor of the Reserve Bank of India, pointing to how vested interests are pushing up property prices. — Pallabika Ganguly