Registration must for real estate agents

For the first time in the country, a state government, Haryana, has announced that real estate brokering services will have to be undertaken by licensed professionals. As a leading industry watcher puts it: “Real estate agents have been acknowledged as important links in the supply chain of real estate.”

The biggest benefit of mandating registration of brokers in Haryana is that there is some accountability built into the system. The early attempts at training real estate agents started in the late 1990s when the Housing and Urban Development Corporation (Hudco), through its training wing Housing Settlement Management Institute (HSMI), ran a real estate training course. Key parameters were identified and training imparted. Today, those trained realtors have formed an association — ACRI.

So what does registration of brokers do and who benefits? The primary beneficiary of the initiative is the consumer. Government agencies such as the National Housing Bank have been trying to find the formula to get brokers together. Explains Shashi Kant, president, Association of Accredited Realtors of India (ACRI), “This is a good initiative as it will tell the user that a credible set of people are working on the brokerage of the real estate transaction.”

In the US, every house that has to be sold has to be listed in the industry-sponsored Multiple Listings Service (MLS) that started in the 1960s. Agents who hold licences to operate in the area, get the details of the listings and after the transaction is concluded, are paid brokerage commissions based on formal applicable rates. But in India, anybody can become a real estate agent with no certification of skill sets or licensing for areas of operation.

So what are the specific skills required to service a customer? “When selecting a broker a customer has to ensure that the broker is familiar with the ground rules of the state or city and the trends of property development,” explains a urban finance specialist. The agent is the consumer’s first interface with the market and a licence will ensure a minimum level of credibility. As the authority which operates and liaises between the owner/developer and the user/.buyer, he should know what to recommend.

This is based on what clearances are required before a property can be transacted and what sanctions to be received. Recently, a developer had started selling a project with the tag NoC approved. Effectively this meant that the developer had received the No Objection Certificate from the authority to start applying for licences to build on that particular piece of land. As a first time buyer this may not strike the user, but the agent then becomes the authority to vet the jargon and ensure that the property is worth investing in.

He should know all the details of the property document, including the legal no encumbrances and building and development permits. He also needs to understand the carpet and super area formats, the loading by each developer as well as the locality profile so that he can advise buyers of the relative merits and demerits of the investment. As the most visible point of contact for a buyer, he should also be able to advise the buyer on whether the property is legally suited to secure home loans. This makes it imperative for him to understand financial advice as well as municipal charges and transaction costs. He also needs a working knowledge of the basic structural sufficiency norms for the area of operations as well.

Keeping this in mind the NAREDCO certificate course, a collaborative initiative of Guru Gobind Singh Indraprastha University (GGSIPU), NAREDCO and HSMI of HUDCO targets real estate agents, property brokers, sales persons, commercial and customer care executives and sales and home loan agents working any where in India.

According to NAREDCO, transactions in the real estate market are primarily linked through sales persons and brokers. Brokerage activities relate to selling, leasing, renting, managing, lending, soliciting and negotiating in return for compensation. Property transactions over the years have become very specialised and complex. Therefore, it is necessary for brokers and sales persons to acquire specialised knowledge of property laws and market operations.

NAREDCO has even evolved a code of conduct to regulate real estate brokers. According to Sunil Aggarwal, CEO of SARE Capital, a real estate-linked private equity fund, “This code of conduct and regulatory mechanism protects not only the consumer but the broker as well. The minute a broker or brokerage firm can formally get the deal signed off by the seller, the buyer and the adviser, the entire process protects all the parties. Delhi has a similar policy document waiting to be passed.

However, not everyone is happy. According to a leading consultant from Hyderabad who has been working in the field for over a decade, “The government has started thinking of regulation of real estate agents. However, unlike the insurance business where the Insurance Regulatory and Development Authority could impose certification on a uniform basis, the real estate industry still suffers from a major problem of rectifying and regulating land parcels, registration and transaction processes and even all-cheque deals. Without these, the regulation of realtors alone does not seem to have the desired effect.”

In the absence of such regulation, agents have been going for self-regulation as in the case of ACRI, National Association of Realtors of India and various small broker bodies. They insist on their members having PAN numbers and sales tax numbers so that some level of checks are maintained.

Self regulation or state imposed, the consumer today is demanding some authentication of the realtors who advise them on the biggest purchase of their lives. Can a right formula emerge?

(via Economic Times)