Watch out BJP! Your 100 smart cities plan can be a breeding ground for frauds

The Indian economy is burdened with expectations currently. This comes in the wake promises made by BJP leaders during elections and through it’s manifesto which was released before the election.

One such promise that has been making headlines recently is the building of 100 smart new cities. As per the statement made by Venkaiah Naidu recently during a press conference, “The smart cities will have better facilities, better connectivity and better environment. And then, we will also create twin cities wherever possible like say Hyderabad-Secunderabad. Satellite towns will also be our priority.”

While there is no denying the fact that India needs new cities and improvement in infrastructure of cities, any plan on the real estate front needs to be executed keeping in mind that the sector has been hogging the limelight for all wrong reasons.

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There have been various demonstrations across the country from farmers and others who feel that they have been deprived of their land and have not been paid a fair price. So we have Singur in West Bengal to Bhatta Parsaul in Uttar Pradesh. Amid the bustle that normally surrounds large-scale transactions, what often gets unnoticed is the widespread incidence of insider trading in real estate. Real estate being the most sought after investment opportunity makes it lucrative for all categories of investors, especially who have financial might.

Insider trading and real estate? How is that possible? After all, insider trading starts and ends with the stock market. Typically, insider trading refers to transactions in a company’s securities, such as stocks or options, by corporate insiders or their associates based on information originating within the firm that would, once publicly disclosed, affect the prices of such securities. Using, the same logic insider trading can also be applied for a real estate transaction. In fact, real estate is the hub of insider trading in India.

Let us take an example. Imagine, master plan for a city is being developed or re-drawn. There are ministers, bureaucrats and other officials involved in the process of building of this master plan. Based on the information that they are privy to, some of these officials ask their friends and relatives to buy land at critical locations in the city for which the master plan is being drawn. The master plan is made public in its final form. Real estate prices go up and relatives make merry. Isn’t this insider trading? Acting on the basis of price sensitive information and then making money from that?

While there are strict laws to prevent insider trading in the stock market and punish the perpetrators, that is not the case with real estate. Such fraudulent deals are dime a dozen and the fraudsters go scot free.

India needs stringent laws on insider trading now more than ever before. With 100 cities being developed, there will be large-scale transactions in land and real estate. It is required that all those having access to price sensitive information are not allowed to benefit from it.

Before planning these 100 smart cities, there is a need for stringent watch on insider trading. Of course, a regulator will be required to monitor all this. Let there be a regulator who will watch, along with the registrar, details of lands changing hands.