The year 2017 will be significant for homebuyers harassed for years because of property sale agreements lopsided in favour of developers, violation of building rules and delayed home delivery. The consumer-friendly Real Estate Regulatory Act (RERA), which kicks in from May 1, has pushed developers to sign agreements with buyers and take other initiatives which they claim are RERA compliant.
The act has some stringent provisions including three-year prison terms or heavy penalty for developers failing to comply with its provisions.
Real estate experts and RERA activists say that most developers are quickly adopting compliance measures by setting up expert teams of project management consultants to ensure timely completion of projects. Some are even planning to adopt the build and sell models for projects instead of housing project prelaunches, which might be scrapped altogether once the Act is implemented.
New rules require only those projects with all approvals in place to be advertised and sold to homebuyers. Information related to approvals, time taken for completion and master plan of the project have to be disclosed before the launch. Each project must also have an individual escrow account, with 70% of sales proceeds deposited in it.
Many developers are upgrading their agreement to sell, training sales professionals on interfacing with customers, setting up special compliance teams to monitor projects and ensuring timely completion of projects. Technical experts are also being taken on board, says Sumit Jha, director and CEO, National Institute of Real Estate Management (NIREM).
Activists and homebuyers, however, remain sceptical of the developers’ moves. “If there are developers claiming that they are incorporating RERA norms and that their builder-buyer agreement is RERA compliant, it is nothing but a marketing gimmick,” says Abhay Upadhyay, national convenor, Fight for RERA.
States are expected to notify the real estate rules, including the general rules and the agreement for sale rules to establish the real estate regulatory authorities and the appellate tribunals by April 30 this year.
However, only the four states – Gujarat, Madhya Pradesh, Maharashtra, Uttar Pradesh and six union territories have so far notified the final rules and not the agreement for sale rules. Some states have also diluted rules.
A look at some new agreements drawn up by builders reveal that there are enough disclosures for customers to take an informed decision about investing in a property. The agreement spells out the entire payment schedule that includes external development and internal development charges but there are loopholes too that need to be plugged.
“The agreement states that the development authority concerned has granted the commencement certificate to develop the project along with the approval date and the number. It declares that the promoter has registered the project under the provisions of RERA with the real estate regulatory authority,” says Akshat Pande, partner, Seth Dua & Associates.
The amount to be paid by the buyer is clearly stated in the agreement and is meant to be escalation free. This means is that there will be no arbitrary escalation in prices by the promoter going forward,” he adds.
An Expert’s Take: RERA Impacting The Real Estate Sector
2017 has been a very influential year for the Indian real estate market. As it went under a ground breaking reformation, due to the introduction of many new laws and amendments. Experts are looking back at the eventful period and its influence on the market. Talking about the major event of the year and its implementation, the experts gives their views on Real Estate Regulation & Development Act (RERA).
According to Shishir Baijal, the chairman and managing director of Knight Frank India. It is still early to review the wave of transformation that has set into the Indian real estate sector this year. He prefers the next 5 years, the best period to assess the progress. The year 2017 saw a certain amount of uncertainty, volatility and a promise of new opportunities. Owing to these reforms, the market has been seeing a gradual improvement in consumer’s confidence and a better outlook for a long-term success rate. An all-round implementation of RERA is required for its complete flourishment.
The managing director of India, Cushman & Wakefield, Mr. Anshul Jain thinks that most of the consumers are opting for a wait-and-watch approach in order to achieve a perfect deal. This lethargy from the end users’ perspective is due to lack of clarity in the rules of the implementation of the RERA. According to him, some states have seen momentum in the development but most of them are finding a slower rate as the developers want to get clarity before starting new projects.
RERA will bring the much needed structure, transparency, and accountability to the real estate sector of the country. Says, Samir Jasuja, managing director and founder, Propequity. After going through some teething issues, he hopes that, the RERA would bring some upward trend in the real estate sector, post its implementation in 27 states.
On the thoughts of RERA implementation, Anshuman Magazine, chairman, India and Southeast Asia, CBRE India, thinks that certain ambiguities have been clarified as the states have been proactive in implementing the Act. Understanding the benefits of a long-term regulator, the developers have been busy in making their projects RERA compliant. Hence the RERA has brought a sense of regulation in the real estate sector. The realty market has not seen much success till now, but these regulations will play a crucial part in triggering a boost to the graph. He hopes that the positive impact of the act will start to show by the middle of the next year.
The Year-In-Review: 2017 Kept The Realty Market On A Constant Lookout
The year 2017 was a game changer for the real estate sector. With challenging reforms like Demonetization, making their way into the market, impacting the realty sector on high levels. Then came the big regulations such as Real Estate (Regulation and Development) Act and GST, which brought transparency and accountability, hence organising the realty market. Coupling the Demonetization with the imminent implementation of RERA and GST resulted in a major slow-down in terms of real estate sales.
A constant turmoil went throughout the industry during this period, but gradually the trends began to change, as the buyers started to look for ready flats instead of under-construction flats. Such major factors changed the ways of business operation of the developers. A relief was felt among the home buyers as their rights were now protected by RERA, hence generating a wave of confidence to invest more in the real estate market.
With an unlimited possibility of investment, the real estate sector proved to be one of the best choices among the masses, as every investment guaranteed a sure shot return. But the real estate sector stumbled at the implementation of the Real Estate Regulation & Development Act (RERA) and generated a large number of unsold units, ultimately bringing down the prices. With deliveries on time and transactions going transparent, these excessive number of unsold units, brought customers a luxury of choosing the properties of their choice at their budgeted prices.
Till date, about 223 housing projects have registered under Tamil Nadu RERA. About 1100 projects and realtors have registered in Gujarat, with MahaRERA with more than 14000 registered projects. To curb down the complex cascading tax structure and cutting tax burden on consumers, the Goods and Services Tax (GST) was introduced on July 1, 2017, in line with ‘One Nation, One Tax’ model. This new tax was only applicable to under-construction projects and hence made the ready-to-move-in apartments, a more attractive option for the buyers.
Not satisfied with the current rate of GST, the National Real Estate Development Council (Naredco) has recently urged the government to halve the GST rate for the real estate sector to 6 per cent to help boost demand for new homes.
The tax authorities began cracking down on the Benami assets after the amendment of the Benami Transactions(Prohibition) Amendment Act. Till date, the income tax department has been able to seize 541 properties. Moreover, funds of about Rs 1,800 crore in various bank accounts are being frozen and more action is expected soon. In its next step, the government is planning to crack down on Benami properties by making it mandatory to link Aadhaar with property transactions.
The affordable housing sector might see a jump in sales, after the revision of the carpet area for the Middle Income Group (MIG) category under the Pradhan Mantri Awas Yojna (PMAY) scheme. An increment of about 90 sq m to 120 sq m in MIG-1 and 110 sq m to 150 sq m in MIG-2 were made in the carpet area. Providing the middle income home buyers with bigger and better houses.
These toughened laws are pushing the non-complying companies into a merger with the bigger players. Hence eliminating the delay and other setbacks, the consumers are being more protected, the increasing purchases in the real estate market are finally turning it into a global market.
Mumbai Real Estate Sees NRI Homecoming After Two Years
When it comes to invest in real estate in India, Mumbai attracts the maximum interests from the Non-Resident Indian (NRI) community. Despite the highest property prices in the country, Mumbai continues to garner attention as the most sought after investment destination in India. In the current scenario, a stable government in the centre and a growing economy has ensured a sustained preference by the NRIs.
Earlier NRIs constituted 20% to 25% of sales in the Greater Mumbai real-estate market but during the last two years, the market has seen a dip of about 7% in this sector. This has happened due to various factors such as frequent changes in rules and regulations and delayed possession, a lack of transparency and the exorbitant pricing. The real estate sector went under the big change with the Demonetization, which effectively pointed it away from cash transactions. Then followed a series of new regulations such as RERA, GST, which had a tremendous effect on the market, taking it down a slow path as the potential buyers and investors opted to wait for a better opportunity.
As most of the states started to fall in line at the initiation of the implementation of the Real Estate Regulation & Development Act (RERA). The landmark law finally brought the long awaited transparency and accountability requirements for developers into the system. The Goods and Services Tax (GST) impacted the business operations of the developers. Affecting the older ways of working, Demonetisation did not affect self-governing developers with the right products targeted at the working masses. Therefore, the rest realised the importance of reforming of the business models, in order to improve the potential of the market.
Hence after the dearth of two years, NRIs have slowly started to purchase property in the Mumbai region. All owing to the Real Estate Regulatory Authority (RERA) and a liberal home loan regime, which are together acting as great confidence-boosters. According to the latest figures by the Confederation of Real Estate Developers’ Associations of India (CREDAI), the number of attendees at the property exhibition in Dubai was a huge figure of 13,500 NRI visitors, where 210 builders showcased their projects. Also the choice of the NRIs have shifted from luxury apartments to the smaller houses, which are proving to be the better options for investment.
The encouraging reforms by the central and the state government has given a new momentum to the real estate sector. The introduction of the real estate investment trust (REITS) Act, relaxed Foreign Direct Investment (FDI) regulations and the decrement in the rate of interest has helped in replenishing the real estate sector.
Trying to boost the sales, the developers are running overseas campaign, to promote the changing face of the real estate sector. The job insecurity abroad has propelled the NRIs to buy houses, back in the country, where they can live in case if they decide to return home. There are subvention schemes that are being offered by the developers. Where NRIs has to just pay 5% to 10 % on booking and the rest after possession making it an attractive option.
“USA, UAE, Hong Kong, Singapore and Australia are seeing our seminars, roadshows and events. That are being conducted to spread the awareness about features such as the fixed deadline for getting possession, hence generating a good response. Our Andheri project has seen a 25% sales of inventory towards the NRIs,” said Rahul Maroo, senior vice-president and head of international sales at Omkar.
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