RERA Implementation & Its Impact: Unfolding Realty's Reality

RERA Implementation & Its Impact: Unfolding Realty's Reality

By Sophia Rohtagi, Siliconindia   |   Friday, September 7, 2018
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rereThe year 2017 witnessed some breakthrough reforms like GST (Goods & Services Tax) and RERA (Real Estate Regulation and Development Act) implementation that came out to be a nerve-wrecking eye-opener for market purveyors, predominantly in real estate segment. As the implementation of RERA completes one year, the industry seems to have witnessed some serious changes in developers’ interests and consumer benefits. The progressive act encounters radical transformations with real estate developers/builders rushing to get registered but the work is still in progress as 14 states are yet to open functional portals. According to Grand Thornton reports, every stakeholder, right from the government, bankers, PE to consumers, are unlearning the old ways of operating and aligning to the new systems/processes which are RERA-specific. With maximum developers going transparent unlike past undertakings, there is a dire need of gathering comprehensive insight and detailed understanding of What RERA is and how its implementation has long-term benefits in real estate industry.

One Year of RERA

Initially passed by the Indian Parliament on 1 May 2016, the RERA Act came into full swing a year later seeking to protect consumer’s interests and boost investments through transparency and fair transactions in the real estate sector, hence acting as a watchdog in enhancing sector’s potential and moving it towards organized form. Explaining the effects of RERA implementation, Nikhil Gupta, Director, Ajnara India avers, “Post implementation of RERA, the regulatory body upkeep the complete documentation of the builder’s projects which would definitely tend to increase the positive sentiments of the buyers. Evidently, with the increasing confidence of buyers, the realty sector is getting foster day-by-day. RERA punched the clock in May 2017 and in such a short span, it has won the trust of buyers and developers and provided an aid to the unorganized sector in making it organized”.

Taking the transparency spectrum further, RERA authority scrutinized property calculation terms to safeguard customers from hidden chicanery. “As per RERA guidelines, developers and builders are mandated to disclose exact carpet area, built-up area and super built-up area. Upon the costing frame, the developers have the freedom to choose between built-up area and carpet area and charge home-buyers with the price that benefits both. However, if the authority brings out a lawful obligation of charging carpet area cost only, there are speculations about it affecting the planned development that can cause shrinks in common area provision,” elucidates Gururaj Bhat, CFO, Karle Group.

RERA implementation has mandated certain compliances for adherence within the realty circumference, which includes compulsory registration, separate reserve account maintenance, continual disclosures for project’s progress tracking, sale agreement standardization, information sharing and seeking buyer’s approval on any addition or alteration in property plan, to name a few. Obligating such compliances are hoped to create new lines of accountability, trust and make real estate purchases simpler. 

Challenges Ahead

While RERA implementation is diligently working to promote transparency amidst developers & customers and protect banker’s interests, the advent of IBC (Insolvency and Bankruptcy Code) challenged RERA operations as there are no provisions for individuals to claim back monetary finances under the insolvency law. Gaurav Gupta, Director, SG Estates & General Secretary, CREDAI Ghaziabad adds, “The conflict between IBC and RERA guidelines has come to forefront after various builders’ bankruptcy proceedings took place. In this insolvency issue, it becomes reasonably significant to safeguard the interest of both the parties rather than giving primacy to one. Distribution of amount in the respective proportion contributed by them could be the way out which would be quite relieving and a fair, transparent action to be taken”.

As the hiccups are growing between developers and bankers like never before, banking authorities are leapfrogging to finance real estate projects. As said by Chanda Kochhar, former Managing Director & CEO, ICICI Bank, the fundamentals of project financing will have to change to bring back investments. While projects will have to be closely tied-up, the financing authorities will spend an extra hour on concrete planning before monies get committed. These strategies will bring a substantive change in project financing. Certainly, RERA implementation and its impact on real estate sector is abandoning the hyperbole scenario and creating new doors to realty’s reality.

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