The Real Estate Regulatory Act is a revolutionary step which will change the way real estate business is done in India.
By Vineet Relia
The Real Estate Regulatory Act (RERA) is a revolutionary step which will change the way real estate business is done in India. Its implementation will ensure financial discipline, transparency and compliance in the sector. This Act is customer-centric and upholds builder’s accountability which will make the sector more process driven and quality-oriented. RERA will offer a regulated environment ensuring project efficiency and timely delivery and thus positively impacting buyers’ sentiments & investor confidence. The industry will also attract higher investments and PE funding.
Post its accord by the Union government last year, RERA is to be implemented by state governments with their own set of rules and guidelines as per assessment of the real estate sector in their areas. The Tamil Nadu government on August 10, 2017 approved the Tamil Nadu Real Estate (Regulation and Development) Rules, 2017, to carry out the provisions of the RERA Act. Under the Act, all builders need to register their projects before advertising or selling the same.
Tamil Nadu RERA has also launched a portal to ease the working. Public may view the details of the agents, their names, registration numbers as well as their address. With RERA, there would be mandatory disclosure of project details, including those of the promoter, project, land status and clearances. This would increase the credibility of developers and protect consumer rights as well.
For buyers the Act offers financial security as it ensures transparency on utilization of funds. Builders need to open an escrow account for every project and 70% of the money collected from the buyers will be deposited there for project development. The Act diminishes ‘super area’ concept and therefore sales would be based on ‘carpet area’ only, informing a buyer what he will actually get. The Act offers significant buyer protection through balanced agreements. It focuses on the quality and time defined delivery which saves the buyers’ interest to a great extent.
RERA as a policy measure has the potential to revive the sector. Builders should focus on completion of the existing projects, undertake RERA compliance measures for their company as well as projects and also phase out their large projects to avoid any legal mishaps. The Act has the potential to drive unprincipled or unorganized developers off the market and leave a level playing field for credible players. It is also supposed to trigger consolidation of the sector, making it more organized.
RERA is a long-term policy measure having an overall positive and permanent impact. It will help in establishing common and best practices amongst builders and thus increase their efficiency. Multiple doors for organizational funding will be opened bringing in higher investments. Flow of funds will ensure speedy and quality construction and strengthen peoples trust towards developers. Homebuyers’ confidence is now set to increase on the back of these sentiment-building measures by the government.
(The author is Managing Director, SARE Homes)