The Real Estate (Regulation and Development) Act, 2016 (RERA) will finally give India’s real estate sector its first regulator. The act was passed by parliament last year and the Union Ministry of Housing and Urban Poverty Alleviation had given time till May 1, 2017, to formulate and notify rules for the functioning of the regulator. RERA seeks to bring clarity and fair practices that would protect the interests of buyers and also impose penalties on errant builders.
According to Anshul Jain, Managing Director, India, Cushman and Wakefield, the act will bring almost 83,000 registered builders in India under its purview to ensure that the interests of home buyers are protected. Better regulation and accountability will spur investments from foreign and domestic financial institutions and will bolster longer term potential on real estate investments. RERA focuses on mandating disclosure of projects, including details of the promoter, project, land status, clearances, approvals etc. The timely delivery of projects will help increase the credibility of developers as well. As for penalty, both homebuyers and developers will be penalized for delays in payment and completion of projects respectively. The act mandates the developers to deposit 70% of the project cost in a separate bank account to cover project development activity. This step will be substantial in ensuring timely construction of projects and act as a safeguard in the event of any delays as it would limit diversion of developers’ funds for other projects.
Jaxay Shah, President, CREDAI comments: “There has been a long standing call for a regulation like RERA, both from the industry as well as the consumers. The purpose of such a regulation would be to build equity amongst the stakeholders, create accountability, promote delivery driven project execution and facilitate financial and administrative transparency. The present RERA requirements fulfill all these needs. Though the compliance burden is heavy, the Act has provided the right impetus on ensuring that all due diligence which any and all consumers may require are fulfilled. This will go a long way in restoring consumer faith in the real estate sector.
According to Anshuman Magazine, Chairman, India and South East Asia, CBRE, the realty market will be slow, as builders will take time to adopt the RERA rules and hence we will hardly see any launches in the next few months. The current scenario was one of the longest slowdowns being experienced by the realty sector. However, RERA in the long run will only bring transparency and infuse more funds into the realty sector, apart from throwing out fly-by-night builders