Property brokers in Gurugram to move court against capping on brokerage

NEW DELHI: Real estate brokers in Gurgaon are planning to challenge in court a directive issued by the HaryanaReal Estate Regulatory Authority (RERA) capping the brokerage on real estate transactions at a maximum of 1%, a move that may have far reaching consequences for the broker community.

Haryana RERA, in a directive last week, had said that it is taking measures to streamline the brokerage system to ensure buyers are not harassed.

Association of Property Professionals (APP), the NCR chapter of National Association of Realtors(NAR), said it is preparing a legal reply and will challenge the Haryana RERA order in court.

The association is concerned that real estate regulators in other states may follow suit if the order is implemented in Haryana.

“This is our right to earning and there cannot be any capping on this,” said Kshitij Nagpal, president at APP. “We have sought a meeting with the RERA chairperson and if he doesn’t agree, we will move court.”

Rule 10 of Haryana Regulation of Property Dealers and Consultant Rule 2009 provides for 1% of a property’s price as commission with half a percentage each from the buyer and the seller.

“We have just ensured that existing rules are being followed,” Haryana Rera Gurugram chairman KK Khandelwal said.

“Everyone in Haryana acts as a broker and we want to end that practice. There should be proper training and certificates like every other industry,” Khandelwal added.

But Nagpal said the regulation was challenged by international property consultants and brokers associations in court and it was not implemented.

“Some of the commercial deals are on hold as there is no clarity on the order,” said AnckurSrivasttava, chairman of GenRealProperty Advisers, a real estate advisory firm. “Both the property consultants and customers are in wait and watch mode.”

Brokers say the measures taken by RERA to protect the buyer’s interest are too harsh as the cost incurred to complete a successful transaction for a sincere real estate consultant is quite high.

They said a broker spends a considerable time and money to sell a property—from procuring a lead through marketing and advertisement to helping buyers short list properties after numerous site visits to helping them in negotiations with multiple sellers/developers, and then providing post sales services.

However, some of the industry members feel that the move by Haryana RERA will bring down the cost of the property as brokerage can go up to 10% of the property value in some cases.

“In the last decade, we have seen many developers luring the buyers through brokers/agents with hefty commissions, which in turn affected the cash flow of the project and over estimation by the developers to create enough cash flow for the project to see the light of the day,” said AshishThapar, managing director, T and T Realty. “Also, such big commissions gave the urge to brokers/agents to over commit to the customers and misrepresent the facts to the buyers in greed to close the sales transaction.”

Some brokers said the entire real estate industry should not feel the brunt for wrong doings of a few people.

“The Haryana RERA’s decision will not only streamline the sector but will enhance transparency and wean away fly-by-night brokers. It will reduce the final cost of purchasing real estate holdings and boost consumer sentiment,” said Rahul Singla, director at Mapsko Group.