Will RERA empower the Real Estate builders?
RERA (Real Estate Regulation Act) is going to be a revolutionary transformation for buyers, developers and the industry on the whole. With its implementation, the act will bring transparency for buyers and consolidation of the industry. A more regulated industry means that the laws and policies will no longer be hazy and for the first time ever, every developer will be on a balanced field that puts the interests of the consumer above everything else.
What is RERA (Real Estate Regulatory Act)?
The Real Estate (Regulation and Development) Act, 2016 (RERA) is an Act passed by the Indian Parliament which seeks to protect the interests of home buyers and boost investments in the real estate sector.
The Rajya Sabha passed the RERA bill on March 10, 2016, followed by the Lok Sabha on March 15, 2016, and it came into force from May 1, 2016. 59 out of 92 sections were notified on May 1, 2016, and the remaining provisions came into effect from May 1, 2017.
Under the Act, the central and state governments, are required to notify their own rules under the Act on the basis of the model rules framed under the central Act.
Impact of RERA on the Real Estate Industry and its Builders
RERA (Real Estate Regulatory Act) will be a paradigm shift for buyers and builders alike. Let us take a look at how the Real Estate World will change with its implementation and what does it have in store for the “builders” of our dreams:
- Transparency – With the registration of project and property being compulsory with the Regulatory Authority under RERA sections, there will be increased transparency in the marketing and execution of the projects. If any developer fails to comply with the provisions of RERA, it may cost him 10% of the total cost of the project in terms of penalty and a repeat offense would land him behind the bars.
- Consolidation of Industry – The absence of a proper regulator in the real estate sector, was long felt. The Act establishes RERA in each state and union territory. Its functions include protecting the interests of the stakeholders, accumulating data at a designated repository and creating a robust grievance redressal system. This is going to consolidate this unorganized sector to a great extent.
- Boost in Investor Confidence – Developers may be cautious initially about announcing new launches till they get a proper understanding of RERA’s various components, but in the long run, the establishment of a regulator will prove to be beneficial for the sector. With investor confidence returning to the sector, resulting in greater institutional capital inflows in the long term, it is expected to see the segment in revival mode.
- Increase in Efficiency – Common and best practices, in a consolidated sector now, will prove to develop the efficiency and the potential of the builders and the sector alike.
- Fewer project launches – The number of projects launched by builders and promoters will drastically come down initially as the Real Estate Industry will study and analyze the impact of regulations, policy change and its overall impact on the business. However, those honest developers/builders/promoters that are known for timely delivery of their projects will only benefit from this situation as there will be lesser competition for them in the market.
- Unreliable builders will disappear – Many unreliable builders, who deceive innocent investors/home buyers, will be out of the market due to the circumstances or seek partnerships with larger firms to revive their stalled projects, and only genuine builders will survive post RERA implementation.
- Healthy competition along with Corporate Branding – Apart from the Home buyers who are the direct beneficiaries of RERA implementation, developers who are genuinely interested in the business of Real Estate will definitely gain from the timely delivery of projects. It will infuse customer confidence into the projects and in return will help developers build their brand and reputation in the industry. The presence of the projects under reputed builders is expected to increase in the market creating a healthy competition. This will immensely help credible developers and dissolve unorganized developers who thrive on the innocent homebuyers.
- Lower Equity Cost – Due to lack of trust amongst the lenders towards developers, developers end up taking a huge amount of loans at a very high rate of interest. Once the real estate schedule is organized post RERA implementations, Private Equity Players, Banking, and Non-banking Financial Companies will not hesitate in funding projects proposed by developers which are genuine by nature. Developers having all the requisite permits to find it easy to get their projects funded through these lenders. This will, in turn, lower the equity cost and lessen debts for the developers.
Changes come with hiccups, so the initial backlog and other transitional issues are unavoidable. But the holistic approach of this revolutionary and visionary act will definitely prove to be positive and advantageous for the homebuyers, and no less for the builders too in the long run.