It has been a year since the Real Estate Regulation and Development Act (Rera) was introduced and it is yet to be rolled out across the country. Several state governments have either delayed notifying the Act or have diluted its provisions. “Maharashtra has implemented Rera in its true sense and Madhya Pradesh is catching up now, but implementation is slow in other states,” says Pankaj Kapoor, MD, Liases Foras. A majority of the states are continuing with an interim regulator and have not instituted a permanent regulator under Rera. “Of the 25,000-odd projects registered under Rera across the country, 62% are from Maharashtra alone,” says Samantak Das, Chief Economist and National Director, Research, Knight Frank India. Bengal has taken a different route altogether, introducing its own housing law—Housing Industry Regulation Act (Hira).
“It’s still early days for Rera, so there is no purpose in focusing on its slow implementation. In 3-4 years from now, real estate will be a totally different industry (courtesy Rera),” says Dhruv Agarwala, Group CEO, Proptiger.com, Housing.com and Makaan.com. The improving real estate environment is the key reason for experts’ optimism. “Recent judgements by Maharashtra Rera—some of the judgements came within 30 days of filing complaint— have been successful in restoring buyer sentiment in under-construction projects,” says Das.
Rera has made real estate sector relatively transparent. For instance, builders can no longer give a false impression of a property’s size by citing ‘built-up’ or ‘super built up’ areas, now it is mandatory for them to quote the ‘carpet area’ in all agreements. Buyers can also see the status of their project—the site plan, units sold, construction stage, possession date, etc., on the Rera website. “One website with all project details makes realty transactions hugely transparent. Home buyers can also see the number of ongoing projects by the same builder and see whether the builder is over stretching himself,” says Kapoor.
Reduction in supply Slowdown in new launches was a short-term negative impact of Rera. “Developers stopped indiscriminate launches. They are now extremely cautious about new projects and make sure that all approvals are in place before any launch,” says Agarwala. The supply has now started picking up again. “With strong builders taking over projects from weak builders, the industry is getting organised now and the supply will increase soon,” says Agarwala. Will the consolidation leave realty business in the hands of just a few builders making it a sellers’ market? Kapoor does not think so. “While harsh on weak and bad builders, Rera has opened up the opportunity for small and good builders. Good and small builders can get credit from financial institutions. So, Rera is actually helping expand the market and not consolidate it,” he says.
Extended possession dates
Rera has led to extensions in possession dates, in several cases by more than five years. Stiff penalty for project delays on builders has led them to extend the possession dates. “There are several approvals that need to come in at the time of project construction. Since builders are not sure about them, they have extended possession dates. Bringing municipal corporations’ sanctioning authorities under Rera will help reduce corruption and streamline the approval systems,” says Kapoor.
Some builders are trying to manage buyer discontent due to the extension of project deadlines by giving verbal assurances of finishing the project earlier than the date mentioned to Rera. Agarwala believes that most builders will deliver before the possession dates fixed under Rera rules, but accepting verbal assurances from builders will be risky for home buyers. “In addition to making sure that the project is Rera approved, buyers need to insist that all the commitments made by builder are given in writing,” he says.
Rera not a magic wand
The transparency brought about by Rera aside, don’t take all Rera-registered properties as worthy of investment. “Just like all companies in the stock market (regulated by Sebi) are not investment worthy, there may be several Rera-registered projects that may not suit you. Due diligence even on Rera-registered projects is a must,” says Agarwala.