One of the most attractive investment avenues has been the real estate sector. Sale, purchase and renting out of immovable property for earning a profit are summed up as real estate activities. Jammu & Kashmir is a place where real estate has outperformed almost all investment options. The margins in real estate deals are so attractive that once an investor successfully parks his money in the sector, he almost stops looking at other investment opportunities around him. This they do despite the fact that real estate is an asset form with limited liquidity and is highly cash flow dependent.
The problem with this sector is that even a commoner tries his hand in real estate investment to make not only quick but big bucks in a single deal. He hardly acquaints himself with the risks associated with this kind of investment. What I have observed is that these raw real estate investors get themselves into negative cash flow for a period that is not sustainable. This immediately forces them to resell the property at a loss. In many real estate deals, I have seen people going bankrupt, where the brokers play fraud in a transaction.
Today, the specific purpose of choosing real estate investment as the subject of the column is to bring its dark side into limelight where gullible investors are defrauded by the real estate brokers. There are innumerable frauds committed at our place (J&K) by the breed of brokers working as self-styled real estate agents purely in private capacity, and the frauds are taking under the nose of authorities. There are a good number of instances where a victim has been going from pillar to post for years together either to recover their monies or take possession of the property for which they have paid through the broker.
Here I have a shocking tale to share. Some time back, an old-aged feeble couple knocked at our door. They asked for permission to come inside as they wanted to discuss some serious matter. As we made them comfortable inside our home, the couple before narrating their ordeal handed a set of documents to us. It was a sale deed of land with photographs of the seller and the buyer pasted on it. The couple revealed that the sale deed was of the land adjacent to our home. It was shocking as the land belonged to one of our cousins and the photograph of the seller on the sale deed was of some unknown person. Before we could react, the couple informed us that they were aware that the sale deed was fake and revealed that a broker had cheated them. They just needed to cross check the facts.
Actually, the couple, some five years back, had disposed-off the gold ornaments of their two married daughters to invest the amount in the land. A broker had shown them a piece of land at a vantage location and paid almost 70 percent of the cost price. But after receiving the amount, the broker never completed the deal and dodged them on one pretext or another. Neither had he returned the money taken in advance. However, after intervention from some influential quarters, the broker after a gap of over five years showed them a piece of land at some other place and executed a sale deed. And it was the same sale deed which they showed us to confirm that the documents were forged.
This is not a lone incident. In fact, incidents are in abundance in every part of the region where people have been defrauded of their hard earned money by a breed of self-styled general real estate brokers. They have been robbing gullible investors and home buyers through fake documents of properties, be it land or a house.
The broker segment in J&K has traditionally been unorganized and unregulated, despite surfacing of some major scandals in the past. Even as the Real Estate (Regulation and Development) Act (RERA) came into force on May 1, 2017, this breed of local self-styled real estate agents continue to remain out of its ambit as most of them didn’t register themselves. They continue to commit gross violation of the Act and fearlessly indulge in sale-purchase of real estate products in personal capacity.
Owing to a chain of frauds committed (and continuing to commit) by a section of brokers, an element of mistrust has been looming large among the investors and home buyers. And the lack of legal surveillance in such transactions has been proving detrimental to the interests of the buyers. Even genuine brokers in the trade stand pushed to the wall by the fraudulent acts of some of their fraternity members.
Remarkably, the law states that no real estate agent can facilitate a sale or purchase of any property, or even act as mediator, if he/she is not registered with the Real Estate Regulatory Authority in their own region (State/UT).
As envisaged in the law, every real estate agent is mandated to make an application to the state Real Estate Regulatory Authority, for registration, along with the fee and documentation that is prescribed. Once a broker is registered with the Real Estate Regulatory Authority, a registration number is issued to him. He has to quote this number in every sale that he facilitates.
The government should run a special drive asking all those indulging in broking of sale-purchase deals of immovable property such as land and house to get registered in a time-bound period or face penalty. It’s pertinent to mention that the RERA has stringent rules in place, to ensure that all brokers are compliant.
Precisely, the rules are safeguarding measures in all respects for sellers as well as buyers of a property.
The authorities should not facilitate brokers the sale of a property that is not within a planning area and not registered with the authority. The brokers should be asked to maintain books of records, documentation and accounts. Notably, it is punishable by law to be involved in any unethical practice, which includes making false statements regarding registration, approval status and other misleading information or service that cannot be offered as per rules.
So, there is a need to impose regulations in the real estate market in J&K, to save gullible people from falling prey to the breed of brokers which are involved in fraudulent real estate transactions and are operating as a big mafia. In other words, an increased regulatory vigilance cannot be largely overlooked in this segment and there is a need to improve transparency and accountability in such transactions. Notably, once brokers are managed under the RERA regulations, investors’ and home buyers’ trust would automatically be restored and this can translate into a win-win situation for all stakeholders – sellers, buyers, brokers and the government- in real estate deals.
Brining the brokers’ community in J&K under the institutional framework will go a long way in cleaning up the mess in the real estate sector. The brokers will have a much larger and responsible role to perform, as they will be forced to disclose all the appropriate information to those involved in a real estate transaction. This way, people will feel protected on all fronts and can make their selling-buying decisions with a lot more confidence.
In short, making a real estate brokerage professional will weed out those agents who have been indulging in selling properties where the title is unclear or the property is disputed, merely for their own financial gain. Let all this cheating come to an end.
(The views are of the author & not the institution he works for)