The Real Estate Regulation Act, which has been put to effect from 1 May 2017, is all set to bring transparency into the real estate sector. The RERA provisions have been put forth with a view to safeguarding the interest of buyers. It is a milestone for the Indian real estate industry. The Act is bound to forge a symbiotic relationship between discerning home buyers and genuine real estate developers. While the draft Maharashtra RERA rules had relaxed a few clauses of the central RERA, the final notification is quite in line with the central act. Maharashtra is yet to appoint a full time regulator and has appointed an interim regulator at the moment. According to us, we believe the Act may have the following implications for developers:
Ongoing projects have 90 days to comply with RERA regulations. This period is likely to witness less activity in the market as most of the developers will be busy complying with the new regulations. Pricing will be impacted with both GST and RERA becoming effective, but may take six to 12 months to pan out. Considering that many states are yet to notify the rules, we expect an impact to be visible in a year. We firmly believe that with RERA, there will be a consolidation in the market, and hence only fewer players may exist. To escape the heavy fines and jail terms, some builders are restructuring the modes of funding, prioritising the projects, and dividing the major ones into different phases to register them individually. Most of the malpractices by fly-by-night operators will be curbed, as builders now have to get all necessary clearances before they can sell the project. Properties have to be sold on clearly defined carpet area.
The RERA Act will bring in the much-required standardisation and professionalism in the real estate sector, leading to healthy and orderly growth of the industry. Specialised regulation and enforcement will ensure consumer protection, and curb fraudulent activities like money laundering. The Act promotes transparency and fair and ethical practices through disclosure of project details and contractual obligations between the project and the buyer. An established and separate regulatory mechanism will enforce accountability and speedy redressal of grievances.
We at Sanghvi Realty appreciate the bold move taken by the current government and Prime Minister in the interest of the larger section of the society. The real estate sector is the second largest employer in the country after agriculture, and ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy. The housing sector alone contributes 5-6% to the country’s GDP.
India has huge potential to attract large foreign investments into real estate. In the coming years, the opportunities in the real estate sector will attract more global players and hence will help the industry to mature, become more transparent, improve management and adopt advanced construction techniques. RERA will surely give a boost to the real estate sector through its progressive and diversified role.
The author is director at Sanghvi Realty.