Author: Sujesh Nair MRICS is a registered valuer. Views expressed in this blog are his own personal views and observations and the associates of Sreedevi Valuers are not accountable for this content and (or) its creation.
Hey readers, welcome to my blog after a long time. I started off as a sole practitioner in real estate valuation in first half of 2018. I remain positive in odd times and look forward to maintaining ethics and quality of real estate valuation, my core expertise yet ensuring that professional relationships are given due importance and no business is lost for wrong reasons. Apart from Covid-19 pandemic affecting us all in one or the other way, the developments in recent years in valuation sector has made me sketch a perception of how valuers or appraisers are viewed and about the clients’ expectations in India and how well I have been able to respond to various demands in mortgage and financial industry. Please note, I have never worked for nationalized banks and so my blog is limited to experiences with private sector banks and NBFC. Also, I begin with highlighting that there are few banks and NBFC who set good practices to follow.
Indian valuation sector, as we all know, had been largely disorganized for decades. It has witnessed some positive traction towards professional and accountable approach after rules; standards and conduct were briefly defined and enforced under Companies Act 2013. Though, a major chunk of valuation professionals are yet to absorb the consequences of their negligence (can also be intentional) which may adversely affect a lender or financial institution and in turn drain public money. This lack of focus on quality and ethics is largely since many valuers operate under laws in India which do not enforce strict monitoring and accountability on part of valuers and (or) financial institutions including lack of effective legislations.
The Draft Valuers Bill 2020, on the other hand is too consumer oriented with higher probability of valuers being at the receiving end even for no mistake of theirs.
Looking at major top banks and NBFCs too, valuers are often termed as ‘vendors’. Not out of any aversion to a nomenclature, but valuers are often viewed as ‘vendors’ in the real sense and viewed as part of the system for purposes ‘beyond’ valuations. I have worked as employee in banks and NBFC and often observed that the training imparted to me was to facilitate valuations and act as intermediary between independent valuers and business requirements. Business always remains the top priority with valuation and valuers expected to ‘align’ to business targets.
Today, as an independent valuer I am always passed on messages to distort valuation figures by financial institutions owing to business pressures. I politely reject their requirements and explain my stand, lay out my reasoning on how the valuation is worked out and restrict my
discussion to the merits of a file (usually of retail mortgage valuations). In most cases the resultant effect has been that I am not given retail files for valuations as I am unable to meet their ‘business requirements’. My understanding is that most leading banks train their employees who belong to valuations department to manage ‘vendors’ (valuers) and see that the gap between business targets and valuer feedbacks are bridged through negotiations. Logical reasoning often takes a back seat in retail lending cases because there is very stiff competition between financial institutions or banks. This directly, often translates to competition in valuation figures; whosoever gives convenient valuations becomes the favorite of the banks. In my own personal experience, I have observed being projected as arrogant and having a negative attitude with scant acknowledgement for efforts put in to bring actual valuation feedback and views to the fore. I have also been blamed that I intentionally pull down valuations to support other firms or banks, which I have never dreamt of.
An instance last year, I came across a major loophole in an online platform for independent valuers for submission of reports. This platform is designed in a way wherein internal employees can edit the valuation report. I highlighted this vide email to a senior level employee only to be left out. He send me a ‘goodbye’ sort of mail thanking me for my good services and never initiated any valuation in 2021. And this is a leading bank, boasting to be pioneers in valuation platform and software.
Similar instance is of another online valuation platform owned and managed by a NBFC. In my view it is one of the best platforms in recent times. This platform is designed to record and document real time communications, file movement in system till its final submission and revisions, if any. The most unfortunate part of this fabulous platform is that the whole process is circumvented through emails and verbal instructions; only the final report is recorded in the online platform. This kills the very purpose of such a good platform and is liberally used for convenience valuations and relaxing adverse remarks in reports.
Another instance of last year, a top NBFC empanelled me in their panel of valuers, except for one file never initiated files. Never paid my fees even after follow-ups, funny part being that I paid them GST. I was never given a copy of the service agreement, so that I could seek appropriate relief. I let it go after some mail wars, hope they use my unpaid money for a good cause.
A top NBFC inflated valuation just to retain a customer, this is common and not viewed as unethical or a bad practice. Everything in mortgage business seems fair even manipulating valuations hiding actual findings or violations etc… I doubt if RBI or NHB has ever bothered to conduct an audit, sample files and fish out such bad valuation practices.
There are many instances where valuers are gauged and engaged for valuations if valuations are convenient for business. We all know that banks and financial institutions have the liberty to decide on whom to be engaged for a valuation assignment. However, there is no system which monitors why certain valuers even after being in panel of valuers are kept at bay and few are only given files. Unfortunately, my assessment says that today’s mortgage business targets are directly and effectively translating business achievements (not all) from convenience valuations.
It’s no rocket science to gauge convenience valuations. A simple instance to quote is number of topup loan files going up even when the real state prices went downwards, were stagnant and limited in transactions post demonetization followed by implementation of RERA, Benami Act and many effective legislations to curb corruption, money laundering and black money circulation. Such lending products are more transacted in the last quarter in every financial year. I am assuming this, but far as Kerala is concerned, I am pretty confident that convenience valuations are evergreen bad system rules with weak or little monitoring mechanisms in actual practice. Few valuers who stick to quality valuations are mostly losers. As a professional I take pride in being part of this small group of valuers.
Despite having all requisite registrations, being a proud MRICS since 2017 and being in panel of more than 10 financial institutions I am gauged on how convenient I am to deliver convenience valuations. With India having a huge shortage of real estate valuers, quality of valuation is yet to witness even average levels. I often feel my independence as a valuer being pushed to limits, me being sidelined because genuine concerns on property are highlighted and me being avoided because I perform mortgage valuations in the interest of the banks or financial institutions who have hired me.
I kept introspecting on why self and few other valuers are forgotten by banks and financial institutions despite delivering quality and following highest ethical standards. I discuss with them, request for feedbacks from many bank employees and seek corrective actions, if any. All of them had only one instance to speak of, “You should support business, we do not see anything wrong in your valuations but it’s a business requirement and a competitive market.”
What do property valuations have to do with competitive markets, business targets…? Valuations should remain independent of such external influences.
Are banks monitoring these? Are they competing for business or setting business targets by competing for convenience valuations? Are they, by any means trying to reduce the subjectivity in real time valuations? Are they training their employees to be treat ‘vendors’ as ‘valuers’ and give them independence or do they expect valuers to take input and learn to ‘support business’?
Is a real property appraiser / valuer in retail lending market in India independent and accountable for his or her valuations and reports?
Is he or she an independent or an in(deed)‘dependent’ valuer?
Can a so-called vendor-valuer survive only if convenience valuations or flexible valuations are opted?
Regulators need to pull up their socks, open their eyes. Banks may have polished policies, but if they are only for the shelves, the regulators must take appropriate actions. Regulators should see how many banks chose to lose business to inflated valuations and ask them to report such instances through the whistleblower or appropriate platform, reward good banks or institutions and chalk out corrective actions for the wrong doers.
With such bad practices in lending industry can valuers be blamed for, the major part of the mortgage industry itself needs a self discipline and clean up? For obvious reasons the regulators should take the initiative.
Unless the retails mortgage valuations are audited and monitored effectively, convenience valuations will co-exist as a necessary evil for valuers to survive and good business platform for low quality valuers.
Best practices in property valuations are still a mirage in the Indian mortgage industry and a very distant dream.