Rooting Out Corruption Could Help Lower House prices by as much as 20%: HDFC Chairman Mr. Deepak Parekh..

High & unrealistic property prices have been the bane of the average man in India for quite some time now.

Indeed, more often than not, real estate prices defy the basic principle of economics.  Thus, at a time when the economy slows and demand wanes, logic suggests that property prices should also cool off.  But ,that has hardly been the case.

The problem with the property market in India is that there is too much murkiness. Unholy alliances between politicians and builders mean that prices are kept artificially high.

Politicians have too much vested interests as a result of which corruption reigns. The existence of corruption in this sector is something that even HDFC Chairman Mr. Deepak Parekh laments.

As per an article in the Economic Times, Mr. Deepak  Parekh opines that rooting out corruption could help lower home prices by as much as 20 per cent. He has left no stone unturned in blaming errant bureaucrats & faulty policies as the main reasons for higher house prices.

Indeed, there are too many approvals required and the more the number of processes and middlemen, the greater is the chance for corruption to seep in.

The other issue is the lack of a sense of accountability among builders. Mr. Deepak  Parekh believes that there needs to be a real estate regulator so that any wrongdoing can be penalized. A proper regulation would also ensure a better approach and coordination between government bodies. Towards this, the government had introduced the Real Estate Bill (REB)2013 which is expected to get cleared in the next session of Parliament. Whether that actually happens remains to be seen.

Property developers / promoters have also been guilty of not giving affordable housing projects their due importance. Indeed, there is considerable latent demand for these homes, but exuberant prices are keeping genuine buyers on the sidelines. Meanwhile, real estate players seem to be in no mood to learn from their mistakes. Most of them have been grappling with lower sales and bloated debt on their balance sheets.

The latter especially has rung alarm bells in the banking sector, which has now begun to trim its exposure to the real estate sector.

Ideally speaking, this should prompt property players to reduce prices so that inventories get cleared quickly. But they may not do so as they rely on some last minute trick pulled out by politicians that ensures that prices remain high.

One wonders for how long such a scenario can continue. But it is obvious that unless corruption is weeded out from the sector, affordable prices will continue to elude the genuine buyer.

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