Wednesday, 5 September 2012

Many houses lying vacant in Kerala! Who is to blame - real estate agents, builders or the government?

A recent report in the Hindu mentioned that there are a large number of unoccupied houses and flats in Kerala. Going by the report the statistics are staggering for a small state like Kerala with a limited population but a high density of population.

So why are the prices so high and why are so many houses lying idle, when the masses or the middle class can barely afford a budget apartment of their own?  One would wonder that with such low occupancy rates, the rentals or real estate prices should ideally be much lower. The empty houses are a result of speculative investments made in the last decade in Kerala plus a role played by the land grabbers or mafia as it is called. In a recent ruling,  the Kerala high court has ordered that loan defaulters should be given freedom to sell mortgaged land themselves at market prices and settle liabilities. This hopefully will avoid the mafia from lying hands on the mortgaged land at below market prices.

The builders point to the high land prices being the most critical cause behind the high costs of apartments. The implication being that budget apartments under 30 Lacs are no longer a realty in good locations in the state. Most of the real estate experts say that land prices in Kerala are predominantly controlled by the land mafia. This has lead to a steep rise in prices even in villages which has made agriculture unviable.

The total area under Paddy cultivation in Kerala has come down from 9 lac hectares in the past to just 2 Lac hectares today. That's a serious loss to the environment as paddy plays a significant role in replenishing ground water levels.

Kerala is the only state that has witnessed area under paddy farming falling continuously. Interestingly, this is happening at a time when paddy prices overall across the country is increasing. The economics and statistics department, government of Kerala, reveals that the area under paddy cultivation declined more than 74% in 32 years. Rice remains the staple food of Kerala and the annual consumption is estimated at 40 lakh tonne with more than 85% of the requirement coming from the neighboring states. Although cost of production is the main reason why many are giving up paddy cultivation, farmers are giving up paddy fields for non agricultural uses too.


Budget Housing must be a priority - For the majority of the state populace, an affordable home remains a dream. The government should take proactive steps and bring in zoning norms like in other countries, which makes affordable housing a reality. Typically a house under 25 lakhs would be very affordable for a bulk of the population. Care must be taken while land allocations are done so that a certain percentage of government or cultivable land, converted into real estate or private land, is given to the budget housing sector.

Bring in Food Security and Self Sustainability - A huge overdependence on other states and reduction in agricultural land, does not augur well for the state in long run with regards to the environment and food stability. Kerala has had a dream run with funds from NRIs continuing to pour in to the state in the last two decades. However no one knows what is in store 30 years from now. To become sustainable and self sufficient in the long run, agriculture and food security are a must with industrial growth in the state. Hence farmers must be educated and given additional incentives so that their farm lands are not taken away and sold at exorbitant prices by land mafias, but instead are converted into thriving agricultural lands with high yields. Yields for agriculture in India are 3X to 4X lower compared to developed countries and their is huge scope for improvement with latest methods of farming. The real killer for Kerala would be if the masses have to shell out beyond their means to spend on food and housing, the two basic requirements of mankind.

Improve the Infrastructure and building rules - Current building rules in the state prohibit taller buildings unless access road and space requirements are met. In zones where a large section of the population stays, these rules must be revisited by the town planning committee. Vested interests of a few should not be kept in mind while making such rules. There is also a need to improve the road connectivity to villages and towns so that operating in a hub and spoke model, people can reside in towns and still work in the cities. This would bring down the burden on city land in Trivandrum, Trissur, Kochi and Kozhikode to a large extent.

Regulations on real estate agents and educating them - Real estate brokerage or agencies continue to be a lucrative field for people from all sections of society in the state. A real estate brokerage should ideally help in a transparent transaction while earning the confidence and trust of the buyer and a seller. Real estate brokerages in other countries is a very regulated and professional field. However same is the not the case with India. A person educated or uneducated could easily step in to this field overnight in the lure of money. The danger lurks when they try to make a quick buck as a middle man and trap the buyer into over paying for the property or the seller into under selling on the price.

If the negative trend of playing middlemen without ensuring transparency, goes unabated, it leads to land scams. The price of a property transaction has serious influence on near by properties. This harms customers and leads to a bubble in the overall market. The government should come out with better regulations and measures to educate brokerages so that the overall interests of the state and its people are kept in mind. It should also have standard reports which publish the ongoing rates of real estate transactions in a given area every quarter so that normal customers are not taken for a ride.

As is evident from this article, a slew of measures are required to contain the weed of exorbinant and unrealistic prices of land and housing in Kerala. A time will come soon, where there might be excess inventory and few takers for it. A much better thing would be for the state and its machinery to take control with proactive measures to ensure the common man has a house and a dream fulfilled!

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