Real Estate (Regulation and Development) Act, RERA is a very significant and crucial law that will impact the entire Real Estate sector in the country. With RERA, transparency and accountability are being introduced in a sector that is widely perceived as big yet unorganized. RERA came into the act after almost a 9 year waiting period. The government said that it will make buyers the king and the developers will get benefit from the confidence of the king in a regulated environment.
To understand the real impact of RERA, we must first evaluate its impact on the primary stakeholders: buyers, builders and brokers. RERA will majorly ensure that there is a flow of institutional funds, making the end-user the real winner and protect them from unscrupulous activities. RERA, along with demonetization and GST will make sure that the market is largely driven by end users. This article will give you a quick overview of Indian Real Estate after RERA:
IMPACT ON BUYERS:
- There will be more accountability and compliance from the developer’s end as RERA renders brokers, agents and developers punishable if they do not comply and abide by the regulations.
- Home buyers who use the services of real estate agents or brokerage firms will be protected. Under RERA, agents and brokerage firms will have to ensure that they are duly registered with the Regulator. They will be accountable for their business activities and practices.
- Each state will have regulatory bodies as appellate tribunals to resolve disputes between builders and buyers within 60 days. Once the pending complaints get resolved, and we have the systems in place, we are sure that the future complaints will reduce in number.
- The push towards timely delivery is possibly the biggest benefit for homebuyers because non-delivery of projects has been a major concern.
- The buyers who have invested in real estate projects can secure interest at SBI lending rate + 2% per annum for delayed possession.
- The buyers will be in a better position to seek softer loan terms from the lenders now. As of now when the home loan interest rates have come down to 8.35% p.a., the eligibility of buying a property has gone up.
IMPACT ON BUILDERS:
- All residential and commercial projects developed on land exceeding 500 square meters or eight units have to be registered with the Regulator before the project launch.
- The developer has to clearly mention carpet area also along with a super area in builder-buyer agreements. They are also liable to undertake repairs of structural defects for five years now!
- 70 percent of funds for a project received from customers will be held in a dedicated escrow account. This will be used exclusively for that specific project, speeding up work and ensuring timely completion.
- Only the organized players, which are cash-rich, will be able to survive. The approval process for the projects will decrease. Moreover, any new project launched will have to be RERA approved and the developers will need the RERA license to start the project.
- The new project launches will reduce, but this is a positive aspect for the builders. As the supply will be less, the supply chain gap will be recovered.
- The competition will decrease. Homebuyers who earlier have been only focusing on price will now look at the brand, quality of the product, location.
IMPACT ON BROKERS:
- With RERA all agents and brokerage firms will be registered. Thus the brokers who did not hesitate to foist inferior or flawed properties onto their clients will be wiped out.
- Brokers in the unorganized space will also have to get a license or they will go out of the market. This will help real estate broking business become more mature and evolved like in the developed countries.
- Any information they are printing or publishing should be RERA-compliant. Brokers will not be able to make any false claims to the buyer.
Thus, Indian Real Estate after RERA will become the biggest beneficiary to home buyers’ and investors’. A builder's depth of credibility on the market has always been the foundation of his success, and it will be even more so in the post- RERA era.