Government proposes to issue licences to the brokers

To protect homebuyers from unscrupulous property agents, the ministry of housing is planning to make it compulsory for real estate brokers to get registered with the proposed real estate regulatory authority (RERA). It also plans to expand the purview of RERA to cover commercial as well as residential real estate.

Real estate agents will now have to get registered with the proposed real estate regulatory authority and get a licence and get it renewed periodically before they set up shop. If the broker were to commit a fraud, the licence can be cancelled – as is done in Dubai and Singapore. It also means the end of the fly-by-night property agents.

Honey Katyal, CEO, Investors Clinic says that it is a welcome move as brokers will be made more accountable for property deals by getting a service tax registration code and a licence from the government and paying service tax to the authority. Now they get just a dealer code from the developer. The real estate market is also going to get more organised.

“The fact that a licence can be cancelled if the broker were to indulge in fraudulent activities will instill fear in the minds of the broker community,” he says.

S K Pal, an advocate, says that since brokers play the most important role in the supply chain – they are the first point of contact before the buyer finalises a property deal – they ought to be made accountable.

In most cases, when problems arise with a project, the broker simply washes his hands off the entire deal. That’s primarily because he has received his commission and the matter is closed.

If brokers are regularised and their licences renewed from time to time, they will be brought under the tax net and will also have to pay licence fee to the government which means revenue for the latter, Pal adds.

The move will help regulate black money, increase revenue collection, and strengthen the system of brokerage. Pal cites an example of a doctor who booked a property worth `80 lakh in the NCR. The broker he had invested with had promised him a free ticket to Dubai but the trip never materialised because the broker did not get his commission from the builder. The matter went to court.

“A qualification bracket can also be brought in. The message of the government is clear – strengthen the house buying process by bolstering the confidence of the investor. Regulating them is essential because the broker is always in a better position for collective bargaining with the builder as he does block bookings for them,” says Pal.

In the long run, the role of brokers can be enlarged to that of agents who can sell Real Estate Investment Trust (REITs) in the future; they can also operate seamlessly anywhere in the country. What this means is that the marketing cost of builders can come down drastically.

Will bringing brokers under the ambit of RERA create another pile of files on property disputes? This argument does not hold water as initially files may pile up but in the long run, as the market gets regulated, agents who are found to have indulged in fraudulent practices, will be ejected from the system and cases of fraud will come down drastically.