RERA: A blessing in disguise for realty sector

It is expected to increase pan-India sales besides counteracting lengthy and cost-intensive dispute resolution mechanisms. By Shrinivas Rao

October 21, 2016 09:52 pm | Updated December 02, 2016 10:47 am IST

26/01/2009 Mumbai: Mumbai: Concrete jungle! View of the skyscrapers coming up in south Mumbai and real estate market today stands for luxury redefined from flats the word has now changed to condominiums; apartments are synonym to penthouses and houses to villas and estates. Luxury spells in every Mumbai real estate property and realty development in Mumbai and all across India. As Mumbai real estate market witnessed a slow down._Photo: Paul Noronha

26/01/2009 Mumbai: Mumbai: Concrete jungle! View of the skyscrapers coming up in south Mumbai and real estate market today stands for luxury redefined from flats the word has now changed to condominiums; apartments are synonym to penthouses and houses to villas and estates. Luxury spells in every Mumbai real estate property and realty development in Mumbai and all across India. As Mumbai real estate market witnessed a slow down._Photo: Paul Noronha

It’s true that the Real Estate Regulation & Development Act, 2016 (RERA) promises to improve India’s accountability and transparency score. In a country where real estate lacks an industry status, brokerage is one of the easiest businesses that calls for zero qualification/experience/code of practice and operates on government-prescribed guidelines or expectations. While RERA has been unanimously voiced as “buyer friendly”, it’s actually a move for developers in this country to re-establish their credibility.

The lack of defined roles and responsibilities in this sector leaves ample scope for ambiguity and confusion amongst commercial, retail and residential end-users. Developers across the country now need to deposit 70% of buyer collections in a separate escrow account dedicated to fund land and construction costs for the specific project. This move is certain to improve the liquidity for developers and the subsequent financial clarity would encourage renewed interest in the sector from PE funds, apart from end-users.

Project information such as carpet area details, project schedule, layout plan, land status, status of approvals and agreements previously shared verbally will now be documented. While this major real estate reform is sure to re-instate a sense of security amongst commercial and residential end-users, it also helps developers sell more inventories.

More FDI likely

Meanwhile, standardised processes and procedures will help revamp the development of the sector and pump 20% more funds from FDI into the Indian realty space. It is also anticipated to increase pan-India sales in the residential sector besides counteracting lengthy and cost-intensive dispute resolution mechanisms. While a judicious approach needs to be adopted towards project timelines and funds, the developer doesn’t have to deal with piling of unsold inventory and moreover has an opportunity to sell stake in case the project doesn’t perform well.

Rules for implementing the RERA bill still need to be formulated by the State governments in conjunction with the Centre’s RERA Act. While the Act only comes into force by March 2017, setting up a functional regulatory authority with judicial officers and an appellate tribunal is essential for its smooth operation. In case of inconsistency with State laws, the provisions of this Act have an overriding effect on contradicting norms. A delay in the establishment of RERA will only continue the policy paralysis in the system. We hope that this step will go a long way in setting the tone towards a more transparent and accountable real estate sector.

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.