The real estate act, passed by the Rajya Sabha on Thursday, will help reshape the entire sector and play an important role in reviving the economy as a whole.
The Real Estate (Regulation and Development) Act will go a long way in reviving the real estate sector, as it will bring in transparency and financial discipline say consultants, developers, investors, and end users.
As the new law includes current projects under its ambit, developers are now obliged to set a timeline for their completion. But, first, each state government will have to appoint a Real Estate Regulator and frame the regulations.
This comes as a signal relief to home-buyers who have booked or bought houses in projects that have seen staggering delays in delivery, as the new law will increase their chances of getting possession of their houses at a predetermined, early date.
As for new buyers, once a project is registered, a prerequisite before any launch, the chances of timely delivery will improve vastly. This will bring back the confidence of buyers and help revive the sector. Anuj Puri, chairman and country head of JLL, India, says: “The enactment of RERA will almost single-handedly revamp the way this sector works across the board, from developers to end users and investors, to lending institutions and government agencies involved in buying and selling property. It is by far the most decisive step in taking the sector towards transparency and reaching towards the kind of standardized processes, procedures, and accountability guidelines that the industry requires to progress.”
Even developers and builders have welcomed the act, despite the fact that it is to regulate their business practices which brought notoriety, many confess in the hope that it will help revive the sector, facing an acute slowdown for some time now.
Currently, the sector is plagued with problems of delay sometimes extending up to even 10 years in the completion of projects. Of course, it is not that developers alone are to be blamed government agencies and court judgments are among the leading contributors to delay in projects.
But, the worst part is that developers hardly pay any penalty to customers. In the end, buyers take a double whammy in the form of EMIs on the home loan for houses under construction, even as they pay a matching amount on their rented houses. This turned away potential buyers from the market, which has led to the current slowdown in the sector.
The new act has a provision of stiff penalty for project delay and stipulates that builders have to pay the same interest to customer that the banks charge on their loan amount.
“If implemented in the right spirit, this law will help revive home-buyer confidence in the property market and could facilitate greater volumes of domestic as well as overseas investment flows into the sector,“ Anshuman Magazine, chairman and MD of CBRE, South Asia, said.
Also, the act has to be re-enacted in every state, as real estate is a state subject. Each state will have to frame rules to regulate the sector and appoint a regulator who will adjudicate the regulatory framework.
However, the developers’ community has stoutly opposed the provision in this law to bring current projects under its ambit.