While RERA has ushered in a hopeful era of transparency and regulation in the real estate sector, it has brought developers, promoters and real estate agents in an unfamiliar environment, where they are trying to adjust to the new directives.
Noida: The Maharashtra RERA has ensures transparency, but has also hits developers hard. As expected, the number of launches dropped in Q1 2017 by 24% with 4,900 launches as compared to 6,500 unit launches in Q1 2016, according to a just-released research report by Colliers Research.
While the Modi government’s historic move — approval of Real Estate Regulation and Development Act (RERA) – ushered in a hopeful era of transparency and regulation in the real estate sector, it has brought developers, promoters and real estate agents in an unfamiliar environment, where they are trying to adjust to the new directives. The Maharashtra government is one of the frontrunners to notify the rules related to RERA and create a website. Even though the government is still ironing out several details, an online mechanism is already in place for registration of real estate projects and real estate agents. The rules stipulate that all new under construction projects must register with the authority by July 31, 2017. After that date, developers without registration won’t be allowed to advertise or sell projects in the market anymore. In the wake of such requirement, developers and agents have both geared up for the registration process.
However, as expected, the number of launches dropped in Q1 2017 by 24% with 4,900 launches as compared to 6,500 units in Q1 2016. This drop may continue for a short term as developers are adjusting to the new RERA rules.
While several aspects regarding the implementation of the Act remain ambiguous, according to the Colliers flash report on Maharashtra RERA, developers should follow directives prescribed in the Act regarding registration, with the regulatory authority, opening and maintaining a separate account, ensuring clarity in land title and ownerships and comply with all other guidelines specified by the Act and the regulatory authority.
“The developers have been selling projects and units based on the marketing plan and layouts, and super built up areas often represent a loading on the nature of amenities a project offers. Layout plans approved given applicable FSI norms and rules have differed from sale plan and chargeable areas of projects. This poses challenges as the developer now has to upload on website (to enable sales) all sanctioned and approved plans and the buyer can do diligence and be privy to artificial mark ups in such super built up areas that sometimes go as high as 40-60% higher than carpet area. There is hesitation of under construction projects sold prior to RERA to follow set of rules prescribed under RERA”, said Ravi Ahuja, Executive Director, Office Services & Investment Sales, Colliers International India.
Though a lot of panic has ensued among developers post RERA’s implementation, several buyers who are plagued with delayed projects can now breathe a sigh of relief as they have an option to seek justice from not only consumer courts, but also the regulatory authority. Hence, Colliers expects that RERA’s implementation should help buyers to achieve seamless transactions and avoid financial loss in property investment.
“With the RERA becoming a reality now, it is important for developers to prepare for the changes promptly. The change in the real estate cycle may act as an entry barrier for small players and speculators. We believe improved project planning will help developers avoid delays and manage project funds efficiently. It would be prudent to hire planning professionals to take all steps to ensure timely project completion. Making such preparations early should give developers an edge over rivals and boost buyers’ trust, said Surabhi Arora, Senior Associate Director, Research, Colliers International India.
The provisions of RERA state that developers/promoters cannot make a sale without registration of their project. Buyers should also be aware that they cannot file a complaint against developers who are not registered before entering a sale agreement. Developers failing to register by the end of July may receive a non-compliance notice. The Act has also specified penalties for non-compliance of registration norms for both the project and the agent. In fact, as per market sources, the MahaRERA authority has already served notice to a real estate agent for a misleading advertisement.
There is still a lot of uncertainty on some RERA provisions, and they will only be resolved once there is a precedent. Currently, Maharashtra is one of the few states that have started the application of RERA and all the other states may follow suit. However, it is very likely that the implementation process and norms will differ from state to state.