Where is the Transparency ?

Last week while publishing Public Opinion about Realty, I questioned the protection to home buyers and the absence of a powerful body like the SEBI. In a report released just minutes ago by KIM ENG Sec of Singapore, the analysts are concerned about the shady ways Indian Realty companies function. Excerpts from the report,

Of inventory, 40% is funded from customer advances. Construction does not usually begin until 14 months after pre-sales start. Sometimes projects are launched and pre-sold without securing land rights and despite ongoing legal conflicts. Customers have no protection. Their advances have been used for unrelated investment and actual construction funded by debt against property and shares. We believe that 8 out of 10 projects are currently running behind schedule.

Before listing on the equity markets, some developers used customer advances to build up large land inventory to increase their assets quickly. We believe the expensive land banks will make it difficult to launch profitable projects while the property market continues to weaken.

We also believe that data in IPO documents for some developers did not accurately reflect the data found in annual reports and financial disclosures. Pre-sales have not been disclosed in a standardized format making it difficult to determine sales to end users and sales to speculators.

In many cases, inventory is reported net of customer advances, which results in understating the book value of liabilities. The accounting practice of capitalizing 60% of interest cost on land banks and unfinished projects is misleading, which has resulted in inflated earnings and inflated book values.

Don't you think it is time to start a powerful regulatory body to protect the interests of Indians who toil hard to BUY that dream home ?