1. 5 ways RERA will impact developers

5 ways RERA will impact developers

The Real Estate (Regulation & Development) Act 2016 (RERA) that becomes effective from Monday is likely to revive the real estate sector by bringing in accountability and transparency.

By: | Updated: May 1, 2017 5:30 PM
The Real Estate (Regulation & Development) Act 2016 (RERA) that becomes effective from Monday is likely to revive the real estate sector by bringing in accountability and transparency.

The Real Estate (Regulation & Development) Act 2016 (RERA) that becomes effective from Monday is likely to revive the real estate sector by bringing in accountability and transparency. The Act is also expected to revive confidence of key stakeholders in the real estate sector. The provisions in the Real Estate Act are made to protect the home buyers. However, it is also important to analyse how RERA will impact developers. With help of Unishire MD Pratik K. Mehta, we take a look at few observations on its impacts on developers:

1. Major impact of RERA will be on on-going projects if they are included. There will be a lot of confusion which will not only delay projects but will also lead to creation of lot of issues. Any law should be applied prospectively and not retrospectively. Too many projects at various stages will be impacted and there could be a major upheaval in the market if not addressed appropriately. The law should rather state a corrective course of action rather than penalise on-going developments which seem to have deviated from the new law and to understand the consequences for consumers, developers and financial institutions which are all part of this play. Also, too many projects will delay the registration process which in-turn will delay project deliveries.

2. The major delays and cost escalations are created not by developers but by various governmental authorities which sanction requisite projects and monitor during the course of development. Everybody is aware of the long drawn battle to firstly avail sanctions which now-a-days takes over 12-18 months and during the course of project, there are several challenges which affect projects. Also, the infamous OC and various services take their own sweet time hereby delaying project handovers. Unless, this is not addressed in toto, there are bound to be hiccups in projects.

3. Cost for developers will increase as sales can only happen post registration which is possible only post approvals. So gone are the days of pre-launches where first set of buyers benefitted with a reasonable price during early stages of projects. With higher holding costs, these increases would eventually be transferred to consumers and hence prices are bound to increase.

4. Refund in 60 days is unjustified as developers are not banks with liquidity. All the money is pumped into construction and incase of cancelations, there should be a re-allotment clause and not strict 60 day guideline for refund as it will be impossible for developers to do so in such circumstances. Infact, with RERA, there will be strict monitoring of monies via escrow account and this refund timeline is not relevant. If several buyers seek to cancel at one go, it may jeopardise the entire project. Say, if there are 100 units sold in a the project and out of 100, 40 buyers do not make payments on time and hence are subject to interest. But due to the delay from 40 buyers, the entire project gets affected and hence developer will have to compensate the other 60 buyers with interest and hence this is unjustified.

5. With RERA, there will be a consolidation in the market and hence only fewer players may exist. This is not good for market as prices for consumers are bound to increase with decrease in competition. Competition already keeps prices in check and small developers who were able to offer that additional buck might cease to exist and buyers will have limited choices to choose out of.

  1. S
    Sadashiv Pimplaskar
    May 10, 2017 at 11:05 am
    RERA is good for affordable housing because 1) Zero tax to the developer 2) Ins utional long term finance would be available because of status of Infrastructure 3) Govt. subsidy such as CLSS would available to the buyer 4) MIG will also get benefit of this scheme.5) ATS would be registered on the site, hence no chance of double funding on same unit.6) One year is exempted to the developer from claiming tax on notional income from the date of the receipt of completion certificate 7) date of completion of the project is fixed and displa on web site.8) Fund given by the buyer is protected and will be returned with interest in case of cancellation. Many more other benefits.....
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