The real estate sector in India is mostly viewed as the most corrupt sector. And there are enough reasons to feel that way. Many individuals who buy homes often end up paying bribes for things as basic as water, electricity connections and so on. Real estate dealings are mired with such exchange of illegal payments and black money transactions.
What's the root cause of this malady? Let us take you to root problems of this shady industry. The problem lies in the complexity of the processes. A builder has to take approvals and permissions from multiple agencies. This is exactly where the cycle of corruption is born.
Let's take the case of Maharashtra which is India's largest real estate market. You would be surprised to know that a builder has to obtain about 60 approvals to build a property in this state. Of the 60 approvals, 50 are from the municipal corporation alone.
Ideally, such clearances should not take more than 3 months. In most states however, it takes anywhere around 1 to 4 years for the approvals to come in. This raises the project cost by almost 20-30%. To fix things at their end, developers then resort to bribery and accounting malpractices. Over a period, such things become a norm. Such appalling processes eventually have a spiralling effect on everything that the developers do: how they set prices for their projects, how they account for revenues, how they make payments to their suppliers, how they determine the value of their land holdings and so on.
There is a strong need to simplify and bring transparency to processes relating to land acquisition and development. Unless the problems are solved at these very basic levels, the real estate industry will continue to be sloshed in corruption. Till then, we have to keep paying the economic cost of corruption.