Alacrity Housing - Ethics First

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Case Details:

Case Code : CGOV002
Case Length : 12 Pages
Period : 1990 - 2001
Pub Date : 2001
Teaching Note : Available
Organization : Alacrity Foundations Pvt. Ltd.
Industry : Housing and Construction
Countries : India

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"Unfortunately today, the phrase ethics in real estate may often qualify as just such an incongruity. Billions of dollars and many decades of formal and informal training have made commercial real estate practitioners better salesmen and more effective deal makers, but relatively little time, attention or dollars have been invested in making ethics in real estate a less contradictory phrase."

- Riis Christensen in ‘Ethics in Real Estate: an Oxymoron?'

"Almost every (government) department that we interact with has stopped asking for tips or bribes from Alacrity. In fact, we have witnessed the delightful experience of an old hand of the department telling a new one - Why waste your breath, they are misers - you won't get a paisa from them!"

- Amol Karnad, Chairman, Alacrity Foundations

Unethical Practices in the Indian Housing Industry

In India, the housing and construction sector accounted for about 40-50% of the capital expenditure on infrastructure projects in a year. The sector contributed significantly to the economy, enhancing GDP, increasing income and generating employment. The construction activity accounted for about 50% of the development outlay in India.

Till the late 1980s, the housing and construction sector was not given the status of an industry. The sector required a scientific approach for the management of materials, machines, manpower and money, and general management discipline to become organized and get the status of an industry.

With the formulation of the National Housing Policy (NHP) in 1989-1990, the construction business started to be recognized as an industry. In addition, the government lost its monopoly status in the industry; instead, it now became a facilitator and monitor of the industry. Soon after the NHP was announced, the industry grew alarmed at the unethical practices followed by many people in the industry.

Because of this unethical behavior, there was crisis of confidence between the supplier and the consumer. The unprofessional and unethical practices covered a whole range of activities in the industry. These included illegal, unauthorized and unsafe constructions; black money transactions; time and cost overruns; exploitative profit margins etc. Bribery was common in the industry since many corrupt government officials demanded huge amounts for issuing permits and clearances for drainage, water and electricity connections, and no-objection certificates etc.

Time and cost overruns were also very common. The builders never seemed to give possession of the flat/house on time.

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1] Posted on dallas.bizjournals.com on January 25, 2002.

2] The NHP was announced in 1988. The long term goal of the NHP was to improve the housing conditions of the inadequately housed and provide a minimum level of basic services and amenities to all.