1. RERA comes into force from May 1: What it means for the real estate sector

RERA comes into force from May 1: What it means for the real estate sector

The Real Estate Act, once completely implemented on May 1, 2017, will not only bring in more transparency and accountability but will also provide mechanisms to simplify and regulate the buying and selling of all types of properties.

Updated: May 1, 2017 10:44 AM
The Real Estate Act, once completely implemented on May 1, 2017, will not only bring in more transparency and accountability but will also provide mechanisms to simplify and regulate the buying and selling of all types of properties.

Mir Jaffar Ali

The Real Estate Regulatory Act, 2016 (RERA) is a landmark development in the history of the sector. The Act, once completely implemented on May 1, 2017, will not only bring in more transparency and accountability but will also provide mechanisms to simplify and regulate the buying and selling of all types of properties. Moreover, the Act will give a major facelift to the methodology in which this sector works, right from builders to end‐users to investors to lending institutions and government agencies involved.

The Act has been well-received by buyers particularly and helped boost their confidence at a time when real estate was going through a rough patch. Going by this, one can expect an increase in sales volumes in the second half of 2017. This was also validated by PropUrban’s recent Developers Sentiment Index survey below

So, what will be the changes once RERA is implemented? Well, the sector is likely to see numerous trends in the coming months. Let us delve deeper to understand some of the significant changes.

Consumer faith to be restored

Real estate sector has often been demotivated by unscrupulous doings of few developers. However, the Regulatory Act has already begun to change the perception of the industry. With its full implementation, the sector will witness increased transparency, efficiency, and professionalism that will further strengthen home buyers’ confidence.

For instance, as per PropUrban’s recent Consumers Sentiment Index, once RERA is implemented fully, about 45 per cent respondents will invest in property within the next six months, while another 26 per cent will take the plunge within a year. On the contrary, nearly 19 per cent are still contemplating to buy, while for 10 per cent the Act does not matter at all.

Inventory Overhang to Reduce in 2017

New launches across major metros took a backseat in Q1 2017. As per our data, the top three southern cities including Bangalore, Chennai, and Hyderabad have seen a decline of whopping 70 per cent in new units supply when compared to Q1 2016. This clearly indicates that developers are largely focusing on completion of their earlier launched projects rather than bringing in new supply.

The implementation phases of RERA has brought tight constraints to the residential real estate industry revealing a large fall in new launches this quarter vis-a-vis the corresponding quarter last year. More stringent policy frameworks on the table are likely to reduce these numbers further.

Moreover, it also highlights that markets are maturing while developers are becoming more cautious. Ultimately, the decreasing number of launches will gradually help in reducing inventory levels across cities.

Increase in Mid-Sized Projects

Another interesting trend that can already be seen is the launch of mid-sized or smaller projects in terms of a number of units. With RERA coming into effect from May 1, 2017, developers seem to be cautious in launching larger projects that take longer durations to complete.

As per PropUrban research (Q1 2017), the three southern metro cities (Bangalore, Chennai, and Hyderabad) showed clear dominance of mid-sized projects (between 100-400 units). In Chennai, out of the total supply, about 29 per cent of the new launched projects are small-sized with each project comprising less than 100 units.

Sector will see major Consolidation

Much to the delight of consumers and the sector at large, realty sector is heading towards a major consolidation activity during 2017. Smaller developers following unscrupulous activities will either become a thing of the past or merge with stronger players to become more efficient and transparent.

Delhi-NCR, for instance, saw a few tie-ups between smaller and branded players last year to implement joint development projects. In the wake of several policy game-changers including RERA, Benami Properties Act, among others, smaller players will thus find it increasingly tough to survive without a big daddy.

Affordable Housing to Rule the Roost

Affordable Housing is definitely the flavour of the season in Q1 2017 with a significant increase in the number of new launches in this category in Bangalore, Chennai, and Hyderabad as compared to Q1 2016.

Besides multiple sops, the ‘Infrastructure Status’ given to Affordable Housing in the Union Budget is a booster shot in the arm, which will definitely pave the way for further growth in the sector. Meanwhile, post the budgetary announcements, several leading developers are also exploring the opportunities underlying affordable segment.

Real Estate sector goes Digital!

In the current era of technology and the prevalence of different social media platforms, realty players have recognized the importance of digital marketing. With rapid Internet penetration into smaller towns and cities, the need to go digital has clearly been defined. Realising the immense potential of digital marketing, several developers and sellers have already begun planning their advertising spend on it.

With increased transparency and professionalism, we are anticipating the number of online transactions to increase over a period of time. NRIs, who had been holding on to their investment decisions due to lack of faith in the sector, will now come forward and make online transactions sitting in their country of residence.

All said and done, timely completion of projects will be the major factor deciding the fate of the sector in the times to come. While these trends will unfold, it will be interesting to see whether the government will pay heed to developers long-pending demand for single-window clearance!

The author is Founder & CEO, PropUrban

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