1. Abhishek Kiran Gupta Head – Research & Real Estate Intelligence Service 20 th April, 2011 Indian Real Estate and Housing – Analyzing the need for a Regulator Evolving national consensus on State level issues

2. 2 Presentation Flow India Urbanization Story Affordable housing segment and government initiatives Current state of regulations Proposed regulatory mechanism Benefits of a Regulator Role of the Collective Thoughts to ponder?

3. 3 India Urbanization Story Pressure on city infrastructure; need for affordable housing High density of population per sq km Lack of housing options Informal settlements, slums, impractical low cost housing Need is not just regulatory reform; but emphasis on processes, improving infrastructure services and making land accessible. Real estate development to conform to the income pyramid of the country

4. 4 Affordable Housing Demand Supply Gap; government initiatives 26 mn homes shortfall by 2012 Housing sector falls short in supplying the demanded product Extensive regulations make land a costly commodity; thereby increasing the supply shortfall Government has initiated JNNURM to facilitate land reforms and provide low- cost housing Urgent need for institutional reform; need to unlock land value for the community; market transparency

5. 5 Current state of Regulations Multiplicity of state laws Land and urban planning is a state subject Local development bodies and housing boards No regulatory mechanism for developer/brokers licencing & registration or individual consumer protection Nearly 50+ approvals lead to delays of upto 2 years No alternate dispute resolution or redress mechanism for the sector except the legal system

6. 6 Proposed Regulatory Mechanism RE Model Act; Other Model Acts under discussion Control and promote construction, sale, transfer and management of colonies, residential buildings, apartments and other similar properties. Greater emphasis on transparency, expeditious dispensation of justice in case of a dispute Accountability of the builders/developers towards project execution and delivery. Establishing a Regulator; appellate Tribunal Compulsory registration and licencing for projects and developers Penalty imposition in case of default related to delivery, specifications Model Rent Control Legislation Model Apartment Ownership Model Property Regulation Model Urban and Regional Planning and Development Model Legislation regarding Housing Cooperatives Model Chapter on Property tax for inclusion in the State Municipal laws These Acts have been circulated by the Ministry of Urban Development to the various States for discussions. In addition, states availing funds under JNNURM have already repealed the Urban Land Ceiling Act and Rent Control Act as part of mandatory land reforms under JNNURM

7. 7 Benefits of a Regulator Is it the cure? No single window regulator in the USA Land being a state subject, role of a regulator cannot be all encompassing Stakeholders feel it will promote vigilance, improve transparency Developers feel it does not address single window clearance demand which actually delays projects from their end Consumers will have access to an alternate redress mechanism Unfounded fears of consumer protectionism; license raj era return Will it lead to price control, promote affordable housing ? Not likely.

8. 8 Role of the Collective State, Centre, Regulator, Judiciary, Developers, Consumers Government legislations to provide protection shield to consumers Active legislation to promote land reforms Amend existing FDI norms for affordable housing Streamlining the approval process FSI differential within the city Judicial activism for consumer protection till regulator is in place Place RE Act on Concurrent List to ensure states’ compliance Bring brokers, architects under Regulator ambit Developers to focus on affordable housing to tap latent demand Provide infrastructure status to affordable housing to promote the concept Bring state development bodies under the Regulator

9. 9 Thoughts to ponder? Regulator, Reforms, Consumer benefit Does the regulator seek to create state level regulatory bodies for monitoring at state level? Even if the Act is put on the Concurrent List, how do states propose to implement it? How will states remove irregularities between the Model Act provisions and their own state regulations? Will the regulator prove to be effective or create just another level of approvals in the already lengthy approval process? Consumer interests are paramount, but how will the regulator control state nodal bodies involved in urban development? Will the regulator lead to creation of actual affordable housing by removing artificial price appreciation or will it have the opposite effect?

10. Thank you Copyright © Jones Lang LaSalle 2011