Do mandatory disclosures squeeze the lemons? The case of housing markets in India

53 Pages Posted: 24 Oct 2022 Last revised: 17 Jul 2024

See all articles by Vaidehi Tandel

Vaidehi Tandel

The University of Manchester

Sahil Gandhi

The University of Manchester

Anupam Nanda

The University of Manchester

Nandini Agnihotri

Centre for Social and Economic Progress, India

Date Written: October 20, 2022

Abstract

What is the impact of mandatory disclosures of quality on market outcomes? Does impact differ across sub-markets and income groups? We answer these questions in the context of housing markets in India where information asymmetry between homebuyers and developers is high and litigation against housing projects is common. We find that a 2017 reform mandating developers to make litigation details public led to a decline in prices of litigated housing units (lemons). The decline in prices was limited to the non-luxury sub-market and there was no statistically significant impact in the luxury sub-market. We discuss possible mechanisms for the divergent results across sub-markets. We find evidence for the role of household resources in acquiring private information. Dissemination of information through media coverage of litigated projects does not explain the differential results. We provide support for disclosure laws in developing countries to reduce market inefficiencies and unequal access to information.

Keywords: Housing, property rights, information asymmetry, mandatory disclosure laws, India

Suggested Citation

Tandel, Vaidehi and Gandhi, Sahil and Nanda, Anupam and Agnihotri, Nandini, Do mandatory disclosures squeeze the lemons? The case of housing markets in India (October 20, 2022). Available at SSRN: https://ssrn.com/abstract=4253280 or http://dx.doi.org/10.2139/ssrn.4253280

Vaidehi Tandel

The University of Manchester ( email )

Oxford Road
Manchester, N/A M13 9PL
United Kingdom

Sahil Gandhi (Contact Author)

The University of Manchester ( email )

Booth St West
Manchester, N/A M15 6PB
United Kingdom

Anupam Nanda

The University of Manchester

Oxford Road
SEED
Manchester, Lancashire M139PL
United Kingdom

Nandini Agnihotri

Centre for Social and Economic Progress, India ( email )

Chanakyapuri
New Delhi, 110021
India

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