Govt Plans To Check Property Prices

Many developers, big as well as small, project a high value of a property by being hand-in-glove with valuers and raise more debt than actually required. The extra amount is then used by developers to finance their personal projects.

According to sources, at least three projects being developed DLF, Unitech and MGF have been priced overpriced by 30-40%. To effectively crack down on such developers, the urban development ministry will ask state banks to re-evaluate the properties at the time of financing so that the developers cannot make undue gains from the transaction.

“In this kind of fraud, valuers in the panel of a bank join hands with the borrower to give an exorbitant valuation report and induce the bank to sanction a loan larger than what is actually needed. Thus, the borrower or the developer would use the money for things other than procuring the property and he will not be in a position to repay the same, as there is no asset to sustain the payment,” said a source in the urban development ministry.

In fact, some players in the real estate industry also feel that such a move will usher in healthy competition. In the absence of a comprehensive legislation, they feel, developers have an undue advantage. “Property valuation is undoubtedly a very critical area and any move to rationalise the same is welcome,” said Ramit Trehan, vice-president (marketing), JMD promoters.

Sources:
Economic Times