The Real Estate (Regulation & Development) Act (RERA) which came into effect on May 1, 2017 is a significant initiative that reflects the government’s commitment to bring greater momentum to India’s real estate industry.
With its implementation, India undertakes a long-term policy measure which will have positive impact on the real estate sector. It is set to build a transparent ecosystem for all industry participants including buyers, developers, financial institutions such as banks and housing finance companies and other important stakeholders.
The government has already announced a number of growth oriented initiatives for India’s real estate sector and granting infrastructure status to the housing sector, especially affordable housing, has opened up significant opportunities paving the way for more impactful economic growth. The implementation of RERA is a much needed and timely initiative to take forward the government’s mission towards industry development and a catalyst to meet the objectives of ‘Housing For All by 2022’ mission.
In fact, RERA is aimed at augmenting governance, protecting investor confidence, strengthening the buyer’s trust and stimulating a plethora of advantages to help home buyers in several ways. Particularly for the affordable housing industry, buyers in the LIG and EWS segments invest in a home to live in rather than for investment purposes as prevalent in high end luxury housing.
The interest of buyers will be protected through RERA and it will ensure that they no longer have to worry about the developer defaulting in completion of the project. Under the rules, it is now mandatory for states and Union Territories (UTs) to set up their respective state authorities. Currently, 13 states and UTs have so far notified these rules, while the urban development ministry has introduced rules for NCR as well.
The other aspect which is a cause for cheer for home buyers is RERA’s rule of depositing around 70% of funds in a dedicated account which will ensure availability of sufficient resources for timely project completion and delivery to buyers, bringing in more transparency and engendering greater confidence. Diverting funds allocated to a specific project has been a cause of great concern for buyers, which RERA is expected to address.
The industry will greatly benefit from establishing a level playing field, particularly for standards of adherence in terms of carpet and super built-up area, overall legality, amenities and quality of real estate projects. There would be mandatory disclosure of project details, including those of the promoter, project, land status and clearances which will ensure credibility of developers and protect consumer rights as well. The confidence of home buyers is set to increase on the back of these sentiment-building measures of the government.
A most noteworthy benefit for home buyers due to RERA is that if the project completion is delayed, the developer will have to pay the same interest as the EMI paid by the buyer. This will enable the government to oblige developers to fulfil their commitment to their customers and ensure that buyers are not short changed.
The government’s continued focus on the real estate industry and implementation of industry defining reforms and new processes has highlighted the sector’s importance and potential in driving the nation’s economic growth. This is the time when the industry needs to take concerted steps together to ensure the success of all initiatives of Pradhan Mantri Awas Yojna (PMAY) schemes being undertaken by the government to fulfil its ‘Housing for All’ mission by 2022.
The writer is CEO, DHFL