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The Real Estate Industry in India does not just concentrate on the build, operate and transfer model. The development model adopted includes options for all types of real estate operations; wherein a customer is offered all essential services under one roof. In practice, the model has been adjusted to meet the real-life conditions. The prominent realtors have made a name for themselves by properly managing the mortgages and the rentals.
However, the government has come out with certain policy decisions to rein in the various players in the real estate scene. Some of the approaches suggested are:
a) Mortgages are usually shorter than sixty years, so that repayments are higher than rents.
b) On the other hand, rents will be increased by items often ignored by the owner-occupier, such as (i) an allowance to cover normal profit, administrative costs and possible adverse changes in government policy, (ii) costs of repairs, which the owner-occupier often does himself, and (iii) a sinking fund to recoup his capital, whereas the owner-occupier’s main concern is that the house will last his lifetime.
c) A part of the rented market may be ‘frozen’ by the government, e.g. local authority housing
d) Because of building society ‘rationing’ finance may not be available for would-be owner-occupiers, especially those in the lower-income groups
e) Imperfections of the market mechanism and immobility, e.g. fixed-term renting leases, mean that it will take much time to achieve equilibrium
f) Legislative provisions e.g. rent control, may on the one hand force people into owner-occupation, and on the other hand deter landlords from renting out accommodation.
g) The pattern of taxation and allowances benefits the owner-occupier and penalizes the landlord. Thus, since any provision for a sinking fund has to come from taxed income, the landlord is discouraged from making the improvements expected by the tenant, who may therefore move to the owner-occupied sector.
It sounds like real estate agents there have a monopoly with all services under one roof. And 60 year mortgages???? That is pretty intimidating. Is this new policy for the entire country or for a specific region?
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