A recent survey by a global consultancy, dubbing the real estate sector in India as most corrupt, has come as a shocker for industry captains struggling to improve the tainted image of the sector. Even Prime Minister Manmohan Singh has said black money in realty was an unfortunate reality.

The KPMG survey established that the sector was the most prone to graft because the property business in India is capital-intensive, involving complex multi-level processes of approvals, coupled with government and political interventions.

The recent allegations of mega land and housing scams, involving Adarsh Housing Society, LIC Housing and Sukna land deal, besides the spectrum awarded for second generation (2G) phone services to some large realty firms have dealt a severe blow to the sector's image.

It is the fragmented and unorganised nature of the real estate sector with no regulator that has made it a happy hunting ground for corrupt politicians and bureaucrats. And the scope for parking black money results in unholy alliances that often come to light.

The image of the real estate sector has also got dented because of the perception among property buyers that greed of real estate developers is leading to unreasonably high and unaffordable prices, thereby souring the dream of millions to own a home.

The developer community on the other hand is quite justified in saying the rising costs of building material, high taxes and long and complex approval processes lead to project delays and cost overruns and thatb they are all contributing to the sharp increase in prices. Even the prime minister says high stamp duties are obstacles to transparent deals in this business. But the realty developers are the ones who get all the blame.

Negating this perception is high on the agenda of industry bodies like the Confederation of Real Estate Developers Association of India (Credai). They have also been lobbying with the media to help change the negative perception about the real estate sector, not just among consumers, but also among policy-makers.

There is no denying the fact that in the past decade, in the wake of reforms and several policy initiatives, the real estate sector has become more organised and professional in its approach with increasing transparency in property transactions.

But there is a long way to go for the sector, which lacks industry status. Today, only a small number of real estate firms are listed on the bourses, making up for 4 percent of the total market capitalisation. Since majority of the real estate companies are not listed, there is this big issue of mandatory disclosures and transparency, which is adversely impacting the confidence of property buyers.

Major real estate bodies have been demanding industry status for the sector to address key issues of funding, shortage of skilled manpower, land acquisition, delayed approvals and multiplicity of laws and taxes.

But then, the real estate industry captains must realise that reward and responsibility go hand-in-hand. When self regulation has not worked effectively, the way forward to address the real issues is a regulator for the sector.

Considering the enormity and scale of urbanisation challenge in the current decade, with 590 million Indians expected to be living in cities by 2030, the real estate sector needs a disciplined direction that, in turn, calls for a serious policy rethink.

If we are not able to tap the full potential of this sector, which is a major employer and contributor to the country's gross domestic product, it is largely because the sector is unregulated. It is unfortunate a section of real estate developers is still opposing the proposed real estate regulatory authority bill on the ground it would add to corruption.

The need of the hour is to push for a realistic regulatory framework, one that balances the interests of real estate developers, property buyers and government agencies for promoting ethical and transparent business practices.

This will go a long way in not just giving a boost to the image of the real estate sector but also in enhancing the attractiveness of real estate as a preferred asset class for investment, in turn ensuring its long term sustainable growth.

* Vinod Behl is editor of Realty Plus, a real estate monthly. He can be reached at vbehl2008@gmail.com and biz@ians.in
* The views expressed by the author in this feature are entirely his/her own and do not necessarily reflect the views of SME Times.