Determinación de las obligaciones

Countries with highly developed housing finance systems possess strong institutional arrangements, including well established legal rights for borrowers and lenders (through collateral and bankruptcy laws), well developed credit information system and a relatively more

stable macroeconomic environment. The housing market in India is incomplete and is fraught with short comings, some of which are being addressed by the government, RBI and NHB.

In India, there is a big gap in the housing finance market which is being addressed mainly by the Central government. Though the enabling financial policies are being made by the regulators there are several players who are not regulated.As the non-financial aspects which could vary across states are not under any dedicated regulator or supervisor, at the Centre or States, housing is developing in an ad hoc and unplanned manner across the country. Consequently, a situation has emerged where 62 per cent of the newly constructed houses between 2007 and 2012 are unoccupied. A step towards addressing this requirement of a regulator has been taken by the Government in June 2013, wherein the Union Cabinet has approved the Real Estate (Regulation and Development) Bill, 2013 (RERD). RERD was mooted in India in 2009. This Bill is expected to usher in transparency, efficiency, professionalization and standardization, with an aim to protect the interests of consumers and promote fair play in the real estate sector.

There is no available database being maintained on mortgages in the country from where the banks can access information about the existing charge on property. The bank and HFCs officials lack skills to effectively appraise and monitor the home loan portfolio. The country also lacks valuers for the housing property and the banks have to rely on some valuers who are not technically skilled. Lack of transparently available information is a hindrance in this respect. To avoid frauds in such an incomplete market, a number of measures have to be initiated by the lending authorities and regulators which result in delay of sanction of loans and inconvenience to the borrowers.

The regulatory authority proposed in the RERD Bill, to be appointed at the Center and States shall undertake all measures for the growth and promotion of a transparent, efficient and competitive real estate sector. It would also be responsible for transparently disseminating database of all real estate projects and provide for dispute resolution mechanism.The proposed legislation would ensure greater accountability towards consumers and is expected to significantly reduce frauds and delays.

The indices released by the two regulators sometimes indicate contradictory signals to the market (Graph 4) which probably could be explained by difference in coverage or methodology (Singh, 2014).

RESIDEX is based on extensive data collected by different commercial banks and finance companies located in 26 cities. The data definitions are neither standardized and nor is the methodology. The data is also collected by non-trained officials.

The methodology of the RBI’s HPI is somewhat standardized but also has gaps. HPI only covers data collected from registration department of 9 cities but computes a national HPI based on that limited data set. RBI’s HPI is a weighted average of city-level HPIs. Ideally, the number of transactions at city level could have been used as weight. However, in the existing data collection mechanism, separate information on the type of the property (residential/commercial) of Chennai is not available. As a result, the proportion of population of the city (to the total population of nine cities together) is used as the weight, as a proxy to the number of transactions.

Indeed, the trend in two indices is generally contradictory and confusing to the market, economic analysts and policy makers.

Ideally, in any housing index, house price data series should have national coverage and differentiate between new and existing homes and between commercial and residential real estate. Those series should be complemented by information on the stock and flows of housing, as well as on construction activity (including employment, price of inputs, and land prices). The housing price index in India needs re-examination, especially the methodology of collecting data and computing indices. First, there should be a scientific basis for collecting data by a well trained staff. The data definitions, characteristics of houses, locality and region data as well as qualitative factors need to be standardized and documented. The methodology used should be a hedonic method while mix-adjusted techniques could also be used and supplemented. India being a widely dispersed country and highly heterogeneous in its demand factors due to varied geography would need a seasonally adjusted national index. It would also be helpful to have a monthly index, like that of the recently introduced Consumer price Index. On a regular basis, it is important that housing data collected for the price index should be verified by survey undertaken by National Sample Survey Organization (NSSO) while the Census should help in verifying and cross-checking the data every ten years.

Graph 4: Trend in Housing Prices

Source: RBI and NHB.

There were a number of difficulties with SARFAESI which hindered realisation of bank funds under dispute. SARFAESI has significantly improved creditor protections for secured bank lenders, but its application is limited to banks and HFCs registered with NHB. Restrictions on how quickly debt can be enforced cause delays; as a result, debtor business is often broken up and sold, instead of being sold as going concern. Access to credit is further constrained by a complex and difficult system for registering security interests. The amendment to SARFAESI in December 2012 whereby banks can purchase the mortgaged property at a reserve price in an auction in the absence of other bidders is expected to further help in the recovery process.⁷SARFAESI’s Central Registry does not operate as an effective, efficient notice of security interest. There are many disparate registries (Registrar of Companies, Patents Registry,

Trademarks Registry, Motor Vehicle Registry, and Industrial Design Registry). The Central Registry does not replace these other registries. Moreover, registration at the Central Registry is not dispositive; a third party whose interest is registered in one of the other registries maintains rights to the collateral. Thus, a creditor must search several registries to ensure his rights.

The price of houses to income (PTI) is also another issue. Engstrom (2013) mentions that PTI for countries in Asia exceeds that for developed countries. According to Chakravorty (2013) the number of years of average income to buy an apartment would be 580 in Mumbai, 270 in Cambodia, 180 in Delhi, 135 in China, 133 in Philippines, as compared with 69 in UK, 47 in New York, 43 in Switzerland, 28 in Sweden, 25 in Canada, 23 in Paris – Metropolitan, 20 in Austria, 17 in Netherlands, 15 in Frankfurt, 12 in Belgium, 11 in Luxembourg.

Land being an important component of housing is scarce in the urban areas. According to anecdotal estimates cost of land as a percentage of final price of house, ranges widely between different cities, and even between cities, generally accounting for about 50 per cent in cities like Surat, 80 per cent in Bangalore and 90 per cent in Mumbai. The price of land can have substantial variance within the city and across the country (Chakravorty, 2013). There is a lack of land records, and titling system. There is also lack of appropriate land laws for acquisition for the purpose of housing. In absence of appropriate laws for acquiring land for housing, there have been instances where government agencies have procured land from farmers at low rates and auctioned it to real estate developers at very high rates. This not only adds cost to housing but also leads to protracted litigation and delays.

There is no standardization of the documents that are required for seeking bank finance nor is there any regulator of housing. Consequently, list of required documents for securing loans from the financial institutions varies across banks, and also depends on the city/state and the type of property.

There is another issue of land assembly, which is the process of acquiring contiguous parcels of land either directly from the owners or indirectly through contractors. The decision of the developer, either to assemble land independently, or to go in for eminent domain acquisition, depends on the cost-benefit analysis of these approaches: the trade-off is between the higher

mandated cost and lesser time to acquisition with the help of eminent domain versus lower cost and higher time and risk in independently assembling land. This may lead to sub-optimal land allocation since the return on land acquired with eminent domain assistance should be greater than the costs of acquisition. In many cases the costs of acquisition may be so high that they surpass the risk-return trade off in independent land assembly. This also brings in demand and supply side issues. There is need to protect the interests of both the developers and owners, and to mitigate any sub-optimality arising in land acquisition and assembly.

Risbud (2013) observes that high land consumption leads to urban sprawl and unaffordable housing forces more than 50 per cent of urban households to build illegally in unauthorised colonies and squattersettlements with insecure titles.

The real estate and housing sector are largely unregulated, opaque, and marred with asymmetric information. The ad hoc pattern of real estate development, reflected in mushrooming of unregistered colonies, and unplanned utilization of scarce urban land have been some challenges of urbanization. With urban population expected to rise to 600 million by 2013 from 377 million in 2011, the provisions of RERD would be very useful in urban planning.

The property registration procedure has remained plagued with cumbersomeness for a long time.

To streamline the property registration procedure, some reforms are underway but much more would be required (Table 8). In terms of time, it varies across the country from registration time of 24 days in Jaipur to 126 days in Bhubaneshwar. The registration time is 2 days in Saudi Arabia, 29 days in China and 42 days in Brazil. The cost (per cent of the property value) to register property ranges from 7.4 in Mumbai to 25.4 in Noida; such cost is nil in Saudi Arabia, China and Brazil.

Table 8: Reforms of Property Registration Procedures 2008-09

In India, Real Estate Mutual Funds (REMFs) have been in existence since 2008. Though these did not own real estate properties in order to distribute income to investors, they offered portfolio diversification benefits to investors.⁸ The housing markets in India lack innovative instruments like Real Estate Investment Trusts (REITs)to increase the flow of resources in the housing sector. REITs owe their existence to their innovation in the US in 1960 as a means of owning real estate property without having to invest on a large scale.⁹There are no regulations regarding REITs in India.These instruments hold tremendous potential in India, owing to increasing urbanization, inflating land and property prices and the issue of affordability of real estate properties. They have the prospective to become an alternative source of funding for the real estate market in India.

Some recent Policy Measures for Real Estate and Housing Sector

The Government-sponsored schemes and programs at national and state levels have given considerable boost to the housing infrastructure in the country and have led to increased credit flow into the low income segment. They are given below.

To encourage development of Smart Cities, which will also provide habitation for the neo-middle class, requirement of the built up area and capital conditions for FDI has been reduced from 50,000 square metres to 20,000 square metres and from USD 10 million to USD 5 million respectively with a three year post completion lock in. To further encourage this, projects which commit at least 30 per cent of the total project cost for low cost affordable housing will be exempted from minimum built up area and capitalisation requirements, with the condition of three year lock-in. Policies to facilitate capital inflows in the housing sector through FDI and ECB route will improve both supply of funds as well as standards and qualities of lending and construction

The Rural Housing Scheme has benefited a large percentage of rural population who have availed credit through Rural Housing Fund (RHF). Accordingly, the Budget 2014-15 increased the allocations for the year 2014-15 to ` 8,000 crore for National Housing Bank (NHB) with a view to expand and continue to support Rural Housing in the country.

Government’s endeavour is to have housing for all by 2022. To reduce the burden for middle and lower middle class due to high cost of financing, the government extended additional tax incentives like increasing the deduction limit on account of interest on loan in respect of self occupied house property from ` 1.5 lakh to ` 2 lakh. Additional deduction of interest upto 1 lakh for a person taking first home loan upto ` 25 lakh during period 1.4.2013 to 31.3.2014.

A Mission on Low Cost Affordable Housing was proposed in the budget 2014-15 to be anchored in the National Housing Bank. Schemes will be evolved to incentivize the development of low cost affordable housing. A sum of `4,000 crores has also been allocated for NHB with a view to increase the flow of cheaper credit for affordable housing to the urban poor/EWS/LIG segment.

Slum development included in the list of Corporate Social Responsibility (CSR) activities to encourage the private sector to contribute more towards this activity. Slum re-development projects and housing for economically weaker sections (EWS) would be covered under CSR.

REITs & InvITs: Infrastructure and construction sectors have a significant role in the economy.

Growth in these sectors is necessary to revive the economy and generate jobs for millions of our young boys and girls. Real Estate Investment Trusts (REITS) have been successfully used as instruments for pooling of investment in several countries. With a view to attract large scale investment in these sectors, in the recent budget has stated governments intention to provide necessary incentives for REITS which will have pass through for the purpose of taxation. As an innovation, a modified REITS type structure for infrastructure projects is also being announced as Infrastructure Investment Trusts (InvITs), which would have a similar tax efficient pass through status, for PPP and other infrastructure projects. These structures would reduce the pressure on the banking system while also making available fresh equity. These two instruments would attract long term finance from foreign and domestic sources including the NRIs.

The Real Estate (Regulation and Development Bill): The Bill provides for a uniform regulatory environment, to protect consumer interests, help speedy adjudication of disputes and ensure orderly growth of the real estate sector and has been much awaited by all aspiring home buyers.

It is a pioneering initiative to protect the interest of consumers, to promote fair play in real estate transactions and to ensure timely execution of projects. The Bill is being proposed under Entries 6, 7 and 46 of the Concurrent List of the Constitution of India, which deals with Transfer of Property, Registration of Deeds and Documents, and Contracts. It contains elaborate provisions to bring in the much needed transparency in real estate dealings through provisions for registration of real estate projects and real estate agents with the Real Estate Regulatory Authority; functions and duties of promoters and agents; rights and duties of allottees etc., The Bill once enacted will lead to establishment of Real Estate Regulatory Authority and Real Estate Appellate Tribunal in every State for registration of all real estate projects and for speedier dispute resolution.