Real estate in India : the back-end picture
|June 6, 2012||Posted by Britul under Thoughts|
What has fueled the growth of real estate sector in India ? There may be many reasons. Growing economic strength of middle class may be one of them. It is hard to determine whether it is because of the growing economic power of middle class or is because of their
growing ambition towards residing in a suburb and living a status full life.
There may be many other reasons too as well, but involvement of Indian middle class in growth of real estate sector cannot be ruled out.
Nowadays, any working person wishes to have a residential flat at suburbs. This has become a life time target for most of the working people, specially the middle class ones. To achieve this target, most of the people works really hard and try to accumulate some extra money and prepares to obtain loan.
Now, let’s see the other sphere of the problem. Real estate builders always took moderately heavy and heavy projects which requires not less than 30 – 40 clearances / approvals from various statutory authorities. Most of them are sought from Municipal Corporation. While obtaining clearances, the builders most often bribe the government officials in various forms. Also, the sluggishness of government official systems causes some delay, and in turn, increases the project cost and other expense. This added expense is passed on to the customers by the real estate builders.
Now let’s go back to the previous scenario of the middle class working person who had been willing to own a flat any suburb area. The elevated cost of the real estate property is passed on to his pocket as well. The bumped up actual cost of the flat cannot be shown in the documents because of various legal complicacies. So the builder requests the person to make some cash payment and shows that due to reduced estimate of the property cost some stamp duty cost will be saved. The cash payment is made and the property is sold out. But this is the point where the white money from the pocket of the buyer flows into the pockets of the seller as black money.
The average middle class working man descried above represents every average middle class working man at every nook and corner of this country. Owing a flat at urban or suburban areas has become a status symbol for many and unavoidable requirement for most of the Indian middle class. This has compelled the middle class to payout their hard earned money in this corrupt cycle. But for those having huge lump of black money, purchase of real estate property is a black money whitening(or utilization) process. They show a very small amount as the property value and pay the builder the actual. The delta amount is their black money which they could not have spent otherwise.
Real estate boom(or bubble!!) in India had brought with it lots of bad effects. Apart from what is described above there are many other bad effects which are related to other spheres of our social life and being affected badly by growth of real estate. Over popularization of urban as well as suburbs is one of them.
You may also like to read: