The role of a regulator is more like a traffic policeman rather than like an investigative policeman.

The traffic police makes rules:

– only persons above 18 should drive

– a 2 wheeler rider and his pillion should wear a helmet

– signals mean…….

– license application, format, test, etc.

We have had a regulator called SEBI for the capital markets for the past 20 odd years and has done a few things. Could it have been better, was it useful at all are all questions which can be raised till the cows come home.

IRDA’s role also can be questioned…but let us say they at least made the ground rules.

If you switch on the television and watch the Tamil channels – what hits you is the sheer number of ads for real estate sale. The real estate industry has no regulation AT ALL. (Sebi’s role in the IPO of Reliance power and Future Capital Holdings can be questioned perhaps!!!).

When you ‘buy’ a land:

– NOBODY tells you what the builder should show you (there is an offer document, proposal form, etc. when you buy mutual funds or life insurance). It is a different matter that the ordinary ‘investor’ may / MAY NOT read it. It is made available in hard and soft form.

-NOBODY tells you what size of house you are getting.

-RISK of improper title is COMPLETELY on the buyer.

-RISK of how the builder accounts for the advance given by people in his books is subject to the discretion of the seller

Take the education industry. There is such a shortage of students, if you need admission in an Engineering or Medical college, just put your phone number on a site. They will chase you enough, you can negotiate the fees,….

Hey the other regulator we need is an Education Regulator.

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  1. Dr. Mohammed Ali Khan

    Is not real estate too disorganized and too widespread to regulate properly?
    And what is the guarantee that the regulatory bureaucrats will favoured the consumer and not the builder lobby?

  2. BY DEFINITION they will speak the language of the strongest player. However the ‘better builders’ will welcome the clean up. Better means guys who can organise the loot (Robber barons?). For e.g. a company which can legally buy potato at Rs. 2 a kg and sell it to you at Rs. 550 a kg is ‘legitimate’. A taxi which is branded and can ‘legally’ charge you Rs. 800 for a trip is better than an auto which is officially supposed to charge you Rs. 240, but ends up looting a newcomer by charging him 750 and charging Rs. 400 for a regular customer is supposed to be looting.

    Alas, that is the truth. At least the regulator will start defining ‘advance money’ ‘delivery terms’ ‘built up area’ ‘who can be an agent’ some prosecution mechanism….which is better than no regulation. The real estate industry (i am a big beneficiary of it being disorganised) needs the robber barons to be regulated. One of the imp barons himself is saying it, so it will happen.

    Real estate industry is far, far, far bigger than the MF industry…might as well ask sebi to regulate real estate, and IGNORE the MF industry.

  3. Really needed one at this juncture. Too much nexus between politician and builders. Common man is really affected and scared of buying a new home. Thanks for bringing up this issue. wish those cheaters also read your blog regularly.

  4. “The real estate industry has no regulation AT ALL.”
    you have to be kidding me. FSI is tightly controlled,property titles are stuck in litigation and rent control for favored vote banks is rampant.and you want further control by babus?
    the ‘builder -politician’ nexus is no idle is reality.
    you need environment clearances from delhi for construction in goa -which is bizzare.

    the problems arent because of a lack of regulator. they are more because of existing regulations that incentivize builders and babus to get together and fleece if the courts had been of any use in india , fleecing consumers would have been tough.but with a moribund court system,obviously the consumer has no recourse.
    i fail to see how another adding another babu(who will soon be captured by the builder lobby) be of any use.
    regulators are an apparently convenient solution to many problems for many people.only to be let down at the first opportunity.

  5. “which is officially supposed to charge you Rs. 240, but ends up looting a newcomer by charging him 750 and charging Rs. 400 for a regular customer is supposed to be looting.”

    i dont know what is supposed to mean. there is an ‘official’ charge only because it is unionized and not subject to competition.
    an outsider obviously doesnt get the prevailing rate because he is ignorant of the rates. there is no fleecing going on here.if he has the knowledge,he simply wont accept the 750 charge.

    there is no right price or legitimate price.there is only price -the price paid.

  6. What would be the role of the regulator in the recent technical failure in the NSE trading system . The circuit filters never became active , the derivative segment continued to trade. As far some experts say on some business channels , the problem will be redressed through “NSE Investor Protection Fund” . Some say the trades should be cancelled .
    What should the retail investor do , who lost his money in the so called “Bad order punching” . Suggestions …. if any ?

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