Un­der­writ­ing de­coded

HT Estates - - FRONT PAGE -

What’s it: Un­der­writ­ing is a process by which a de­vel­oper raises in­vest­ment cap­i­tal from in­vestors to mit­i­gate risks. In re­turn, the in­vestors/un­der­writ­ers get the rights over the hous­ing stock, sell it at the prices they want and share prof­its

It shares de­vel­op­ers’ risk: Nor­mally an un­der­writer gets an ab­so­lute sell­ing right from the de­vel­oper un­der an agree­ment that if he fails to get the in­ven­to­ries sold within a stip­u­lated time­frame, he will pay for the re­main­ing apart­ments af­ter get­ting his in­vest­ment money ad­justed

Not a wa­ter­tight con­tract: The con­tract signed be­tween the builder and un­der­writer is nor­mally an un­reg­is­tered doc­u­ment which lacks le­gal force and which is prone to dis­putes that may fur­ther lead to de­lay in projects

Home­buy­ers get cheated: An un­der­writer is al­ways un­der pres­sure to sell his in­ven­to­ries be­cause he works un­der time­bound con­tracts. So he makes all sorts of prom­ises to buy­ers and might not fol­low up on them

It’s based on re­turn on in­vest­ments: Un­der­writ­ing is against the prin­ci­ples of hous­ing as a ba­sic right of the cit­i­zen as it is based on the marketing model of ‘re­turn on in­vest­ment-ROI’ rather than ‘shel­ter for those who need a house’

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