You may not be able to sell new flat for 5 yrs

Published: 03 November, 2012 07:51 IST | Varun Singh |

Govt proposes rule to prevent investor-driven price shocks in housing sector

Bought a new flat? You may not be able to sell it for the next five years if the government has its way.

The reason given by the government is that investors buy flats and sell these within a year or two for profits, resulting in speculation-driven price shocks for the common man who wants to purchase a flat to have a roof of his own over his head and not as an investment.

Representation pic

A five-year restriction on resale exists today for affordable flats allotted by the Maharashtra Housing and Area Development Authority (MHADA) to people without a home of their own, but the government is now working on making the same rule applicable for private flat deals.

Minister of State for Housing Sachin Ahir said the government was serious about guarding the interests of the common man by regulating the resale housing market.

“We are planning to have the same rule that we have for MHADA or SRA flats and want to come up with a cap on private building deals, wherein once a buyer purchases a flat he will be not able to sell the flat for the next few years,” he said. “This is to keep the investors at bay, because of whom the prices fluctuate and cause suffering to the end users, for whom the flats are actually meant. This rule will be for the common man’s benefit and, hence, we are working on it.”

Reacting to the government proposal, homebuyers were divided in their opinion, with some agreeing the rule would keep investors out and real estate prices in control to an extent, while a section of them said the government was getting too involved in a private affair like selling a flat.

A Mantralaya insider said it would be quite difficult for the government to bring in the rule, as it goes against the principles of a free market economy.

“It would mean that the government is trying to decide when someone who’s buying a flat from a private builder can sell it,” the source said. “It’s intruding too much into a man’s life and in a business that’s private and not even semi-government.”

For and against
Faisal Thakur, an Indian working in the Gulf, said that real estate was generally the best investment at any given time and that there were many people in his know who preferred it as an investment option because of the appreciation in value.

“For people like us who are staying abroad, real (estate) is the place where we can invest safely. If such a rule is brought in, it will be difficult for us to invest in real estate as exiting soon would be difficult,” Thakur said.

While Indians settled in foreign countries have always been the biggest investors in real estate and may not like the proposed rule, prospective buyers in the city seem excited by the idea.

Sunil Kumawat, who’s into business and lives in Thane, is of the opinion that the government is finally thinking of the “actual” homebuyer.

“Investors spoil the market, and so only end users should be allowed to buy a flat. The proposed clause will ensure this happens. It’s the end user who needs the flat in reality, and if investors are kept at bay, rates will stabilise as builders won’t have any option but to cater to the real end user. This way, builders will decide the rates as per the buyers’ need,” Kumawat said.

Govt barking up wrong tree: Industry
Anand Gupta, honorary treasurer, Builders Association of India, said the government needs to change its attitude and, instead of blaming the builders and developers for all wrongs, it should come up with better policies and increase housing stock. “The govt, instead of bringing in such an antiquated law, should come out with a policy for increasing housing stock. The government should construct more in Navi Mumbai as land is available in abundance there and it is also near Mumbai. Increase FSI and stocks will increase. Redevelop all the dilapidated 19,000 buildings and housing stock will increase. The govt should think of better policies if it wants to increase affordable housing,” Gupta said. 

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