When we have exchanges for Securities and commodities, can one think of an exchange for Real Estate in India?
We are in the digital era where almost every other transaction is happening online. The brick & mortar traditional market place is competing hard for survival with the onslaught of the online market place and innovation is due in the real estate segment. The realty sector should come together and create a common “exchange platform”, which can be a comprehensive platform for genuine builders, buyers, sellers, investors, banks, HFIs, insurance companies and even brokers to participate transparently. Builders could list their projects available across locations and seek prospective buyers/investors to login after registering themselves.
The launch price offer could be made available for a specific period of time wherein the prices of flats would be available to be bid by prospective buyers/investors. This period should be used as a pre-launch offer just like the pre-open market session in stock markets. This would lead to a healthy “price discovery” mechanism and the market including the builders, buyers and investors could gauge the actual trend.
Projects coming up, projects that have begun, projects that are in advanced stages, projects ready for occupation can be segregated and allowed to be bid with a base price as per the internal decision of a company. For example, the base price of a 2-BHK apartment in a particular project could be Rs.3,000 per sft. for the ground floor, which would be put on the exchange platform along with availability in numbers, say 100 flats on different floors at different prices. Interested people will start bidding with their preferred prices, floor options, etc. and the best price offer could be accepted by the builder. Once a flat gets sold it gets delisted with a notification to the exchange.
Further, the builders/sellers could provide opportunities for buyers/investors to research before they bid. For instance, for a period of one month the apartment building could be open for research and from the 31st day onward the bidding for purchasing should commence. The buyers could also understand on real time basis the demand for such offerings. For an apartment available in a good locality and being built by a good builder, the demand could be obviously high.
Such a technology-based exchange platform would reduce a lot of unaccounted money transactions and improve transparency. The whole deal happens online with zero possibility of cash handling. It would be the prerogative of the builder to choose the projects he wants to list. A buyer/investor could be part of the listed projects or unlisted ones (similar to that of market transaction and off-market transaction facilitated by the stock exchanges). Even a secondary market can be created exclusively as an extended platform for those who want to do a secondary sale.
Role for corporation
Importantly, the price should be vetted by the respective city corporation (ward based) for which the exchange should take responsibility. Any sale of property, whether through a builder or an owner of an empty plot or a secondary sale, should be done only through the exchange and the local corporation office should be informed of the price that gets fixed from time to time. The volume could be humongous but the power of technology can handle such size.
Further, if the buyer is taking a loan, the transaction confirmation after having made the initial deposit to the builder through the exchange as specified by the regulator (maybe 20% of the total purchase value) can be provided as a proof to the bank/housing finance company. The lender would make the tranches of payments as per the schedule to the builder. Even a home loan insurance can be linked online, facilitated through general insurance companies.
Real estate, for a long time, has been reeling under the tag of being unorganised, where a buyer is always confused across various facets of buying/investing including the pressure of dealing with cash as part of the overall settlement. He encounters several unscrupulous brokers/middlemen. Under the circumstances why not a formal exchange that can weed out such elements and provide a comprehensive platform for genuine builders, buyers, sellers, investors, banks, HFIs, insurance companies and even brokers? A real estate exchange as a regulator and facilitator can address their needs and requirements that can make the likes of Sreedharan deal with confidence and live with peace of mind.
With some brainstorming done by the bigwigs of the industry, a blueprint can be prepared and pursued which could make this asset class organised.
Since the Real Estate Regulator Bill is pending approval for the Government, availability of a technological platform for all stakeholders will be helpful to regulate the sector and provide succor to this important sector.