Often demotivated by unscrupulous doings of few developers, RERA has already begun to change the perception of the industry. With its full implementation, the sector will witness increased transparency, efficiency and professionalism that will further strengthen home buyers’ confidence. This was also validated by PropUrban’s recent Consumers Sentiment Index, where about 45 per cent respondents will invest in property within the next six months once RERA is implemented, while another 26 per cent will take the plunge within a year.
Mir Jaffer Ali, Founder and CEO, PropUrban shares his view with Sandeep Sharma about the finer points and impact of RERA on the real estate sector, how RERA can benefit the property buyer, improvement in fund flow for Real Estate sector once RERA is implemented.
Could you brief us about the finer points of RERA?
Real Estate (Regulation and Development) Act, 2016 is an Act to establish the Real Estate Regulatory Authority for regulation and promotion of the real estate sector and to ensure sale of plot, apartment of building, as the case may be, or sale of real estate project, in an efficient and transparent manner and to protect the interest of consumers in the real estate sector and to establish an adjudicating mechanism for speedy dispute redressal and also to establish the Appellate Tribunal to hear appeals from the decisions, directions or orders of the Real Estate Regulatory Authority and the adjudicating officer and for matters connected therewith or incidental thereto.
As per the act, without signing a sale agreement, developers cannot accept more than 10 per cent of the overall cost of property in advance.
As per the new Act, developers cannot publish an advertisement portraying service/offer that is not available in the project. Developers must upload all ads and brochures in the website address of the authority wherein all details of the registered project has been entered including registration number of the concerned project.
Any structural defect in the building within five years from the possession date has to be rectified by the developer within a month’s time at no cost. In case of failure, buyer will be eligible to receive appropriate compensation.
With construction delays plaguing the sector, specifying time period for project completion during registration has brought significant relief for the buyers.
The Act clearly specifies that during the time of registration, the developer must reveal the name and address of all the real estate brokers/agents associated with the project.
In case, a developer fails to adhere to any of the norms mentioned in the Act, the authority can cancel the registration of a project on receiving a complaint or suo motu.
Brokers/agents involved in facilitating sale or purchase of any project will have to be mandatory obtain registration from the concerned authority.
On receiving the application of the concerned real estate project for registration, the authority has to grant it within 30 days and provide a registration number and login ID and password for accessing the website. Alternately, the authority can also reject the application within 30 days citing reasons in writing, if the application doesn’t conform to the provisions of this Act.
For the projects that are being developed in phases, the developer has to register each phase separately.
As per the Act, a developer cannot transfer the rights and liabilities of the real estate project to a third party without getting the written consent from at least two-third buyers (allottees), and the written approval by the authority.
Other key features include:
Mandatory disclosure of Carpet Area
Mandatory to put 70 per cent amount received from buyers in Escrow Account
Restriction on addition and alteration in the plans
Real Estate Appellate Tribunal to deal with all grievances
What can be the immediate impact of RERA on the Real Estate sector?
Often demotivated by unscrupulous doings of few developers, RERA has already begun to change the perception of the industry. With its full implementation, the sector will witness increased transparency, efficiency and professionalism that will further strengthen home buyers’ confidence. This was also validated by PropUrban’s recent Consumers Sentiment Index, where about 45 per cent respondents have shown interest to invest in property within the next six months once RERA is implemented, while another 26 per cent aims to take the plunge within a year.
Realty sector to see major consolidation: Much to everybody’s delight, realty sector is heading towards a major consolidation activity during 2017. Smaller developers following unscrupulous activities will either exit the market or merge with stronger players to become more efficient.
With increased transparency and professionalism, we are anticipating the number of online transactions to increase over a period of time. NRIs, who had been holding on to their investment decisions due to lack of faith in the sector, will now come forward and make online transactions sitting in their country of residence. In fact, our NRIs sentiment survey indicated that 57 per cent respondents would invest in Indian markets post RERA implementation.
Does implementation of RERA signal new trends in real estate dealings?
The Act has been well-received by buyers particularly and boosted their confidence at a time when real estate was going through a rough patch. Going by this, one can expect increase in sales volumes in the second half of 2017. Thus, the sector will see the emergence of few trends in the coming months.
Interestingly, post RERA, mid-size or smaller projects are likely to dominate the property spectrum. Developers already seem to be cautious since larger projects take longer durations to complete and get the requisite approvals.
As per PropUrban research (Q1 2017), the three southern metro cities (Bangalore, Chennai, and Hyderabad) showed clear dominance of mid-size projects (between 100-400 units). In Chennai, out of the total project supply, about 29 per cent of the new launched projects are small-sized with each project comprising less than 100 units.
Affordable Housing is definitely the flavour of the season in Q1 2017 with significant increase in the number of new launches in this category in Bangalore, Chennai, and Hyderabad as compared to Q1 2016. Besides multiple sops, the ‘Infrastructure Status’ given to Affordable Housing in the Union Budget is a booster shot in the arm, which will definitely pave the way for further growth in the sector.
Whether RERA is applicable to the existing projects under construction?
Yes, RERA would be applicable to all the projects that are under-construction. However, it may vary from state to state. For instance, Uttar Pradesh has excluded under-construction projects. Hence, it depends entirely on the respective states.
Do you see improvement in fund flow for real estate projects after RERA is implemented?
All said and done, RERA will be a watchdog for the malpractices and fraudulent activities of the sector. And with greater transparency and accountability in the sector, the funds will definitely improve. Moreover, with eased FDI norms, several investors are expected to invest in Indian markets.