RERA transforming the Indian Real-Estate Sector
RERA transforming the Indian Real-Estate Sector
The implementation of the Real Estate Regulatory Act (RERA) has gone a long way in formalising the sector and inspiring…
The implementation of the Real Estate Regulatory Act (RERA) has gone a long way in formalising the sector and inspiring consumer confidence in India. In the pre-RERA era, the sector was highly fragmented and unregulated. The grievances of the home buyer and seller were usually addressed in the consumer courts, if at all. Lack of regulation made investing in real estate an intimidating experience. But with the onset on RERA in the country and stricter rules and guidelines, only credible and reputed developers will last in the market. While the policy reforms have helped bolster buyer sentiment, developers have also welcomed the new era of transparency in their businesses.
In the short term, developers have had to revise their business models and shift their focus to the timely delivery of ongoing projects. Previously, although many projects were being launched regularly, there was no guarantee for completion of projects unless one was dealing with a reputed developer. RERA ensures that a deadline for project completion must be enforced.
The resulting transparency due to RERA has forced developers and approval authorities to maintain high levels of compliance. Moving forward if project approvals are brought under RERA, they will be quicker, resulting in reduced construction costs, thereby substantially reducing property costs. Approval authorities will have to correct inefficiencies that exist in the system since there will be less opportunities for project delays with RERA in place. An efficient, fair and transparent system would result in a revived demand for new projects in the market.
Importantly, as transparency in the sector becomes the norm, information asymmetry is no longer a differentiator for performance. Developers and buyers will have to mutually align their goals. This synergy will bring much needed accountability to the sector, which inevitably boosts buyer confidence and increases investor activity in the market.
What Telangana can adapt?
While RERA is a revolutionary policy that has positively impacted the real estate sector, there is still dissimilarity between each state. Only select Indian states have a fully operational policy setup. This increases costs of permissions and registrations for developers having projects across India. For the industry to realize the overall benefits of RERA, it has to be functional to its fullest capacity.
Telangana has the advantage of learning from other implantations of RERA around India. The Telangana state government has tested and formulated its policy after sending teams to study Karnakata, Maharastra, Gujarat and Uttar Pradesh’s RERA models.
The Maharashtra government has reported a successful RERA implementation with about 16000 firms being registered and Rs 120 crore collected towards registration fee. The Maharashtra authority has already settled approximately 350 cases and imposed fines of Rs. 40 crore for developers who have violated RERA guidelines. Telangana RERA can learn from this experience and further improve on its efficiency.
While there have been rules and a temporary regulatory authority appointed, RERA cannot officially be implemented without a web portal. A web portal is required for the registration of real estate developers, builders and real estate agents as well as for receiving complaints from the public. The Telangana web portal is developed and supported by Mahaonline Ltd. which also developed the RERA web portal of Maharashtra. Proper preparation should ensure a glitch-free roll-out and consumer-friendly RERA policy. The goal is to have a seamless online process from registration to certification.
RERA to further Telangana’s real estate sector
Telangana has been one of the strongest real estate markets in India. The state already ranks high on India’s EoDB (Ease of Doing Business) index. RERA’s emphasis on consumer protection and standardisation of business practices will only enhance the state’s business climate. A recent survey by one of the property consultants showed Hyderabad as the only city where property sales have grown—by 32% from the average of 2013-2014 to 2017. Another report by Knight Frank showed a 5% growth in Office space transaction in Hyderabad. The growth of Hyderabad real estate across segments is at all time high and RERA will further spike it. While the real estate sector has been blooming in Hyderabad, especially Telangana, the implementation of RERA is going to further ease a number of things for developers as well as the buyers.
Without RERA registration, developers and real estate agents are not allowed to promote or sell any project. RERA also mandates that developers must disclose all information for registered projects including details of promoters, layout plan, land status, schedule of execution and status of various approvals. This will effectively weed out any unscrupulous players from the market and allow credible developers to flourish. RERA will further raise the confidence of buyers and motivate them to invest in property, thus making Telangana one of the most sough-after real estate markets in India.
The best example of this can be seen in Maharashtra. The state is the only state in India that has implemented the RERA act in letter and spirit. According to a recent knight frank report, over 51% of all new home sales in India come from Mumbai and Pune post RERA. This was around 39% pre-RERA. So the impact of RERA can be seen quite clearly here. If Telangana follows the same model, then this will definitely give a major fillip to the real estate here.
India has seen many major policy interventions recently with RERA being among the most significant. RERA intends to protect the interests of home buyers in an efficient and a transparent manner. The proper implementation of RERA will not only be a key driver in the revival of industry, but will also encourage more investment, thereby fuelling growth.