Across the country, aspiring property buyers are waiting for RERA – or the Real Estate Regulation Act – to be implemented by the States. Time and again, it has been stated that the consumer must consider the reputation of the builder prior to taking a decision to buy a property/asset which is likely to remain for generations.
On implementation of RERA, only builders with sound reputations will remain in the fray – this probably its most important function in protecting consumer rights and interests. Once RERA becomes a enforceable law, it will change the ways in which residential housing projects are planned, offered, sold and possessed across India. Property buyers will no longer need to worry about unfair contracts, delayed possessions, non-notified alterations in building plans and other risks.
The aim of RERA is to make real estate purchase simpler by bringing in better accountability and transparency. In doing so, it will also infuse a lot more confidence among buyers – who, at the end of the day, should feel as comfortable about investing in a home as they are about buying gold.
RERA lays forth several ground rules for real estate buying and selling, including:
- Registration of every real estate project with the appointed tribunal (with some exceptions). Non-registered projects cannot be offered for sale or booked by promoters.
- Mandatory uploading of project details by the developer on the RERA website, including layout planning and completion schedule.
- 70% of the advance collected from buyers needs to be maintained in a separate bank account and be used only for the stipulated project construction. These funds cannot be hived off for other purposes – a practice that has contributed majorly to delayed projects in the past. The individual state governments have reserved the power to alter the amount, but the principle is very much in place.
- Establishment of Real Estate Appellate Tribunals that will handle any issues related to property disputes, with the intention of delivering quick and unambiguous resolution.
- Setting up of an advisory body to deal with matters related to government-sponsored real estate development.
- In one of the most important addendums to RERA, real estate brokers and the way they conduct their business now also fall under its ambit. The days of unscrupulous property agents either acting solely in their own interest or in collusion with developers are now numbered.
In fact, RERA will protect both the buyer and the seller – for instance, it protects developers from non-payment. While the promoter is required to obtain necessary documentation such as the completion certificate, the buyer is liable to be fined for delays in payment. Failure to register the property or comply by other regulations of the Act will lead to hefty fines and even imprisonment in certain cases.
All this may sound too good to be true – and in fact, it is for now because RERA is likely to come into full force from May 2017. All the individual state governments need to get their ‘acts’ together to comply with its requirements and adopt it. The good news is that they do not have the option of not doing so – the Central Government has amply demonstrated that it is determined to push the Real Estate Regulation Bill through come hail or high water.
The Indian real estate market is currently showing positive signs of revival. Even as smaller builders struggle – now also because of the recent demonetization of larger currency notes – credible developers continue to launch new projects and raise funds to meet the committed completion timelines. With RERA in place, several not-so-credible developers will go out of business. Buyer will be protected from players with ulterior motives – in short, fly-by-night operators. This will, in turn, infuse a much-needed positive sentiment among buyers and consequently help increase demand. Increased sales will improve the cash situations of the credible developers that remain after the weeding out, and projects will be automatically delivered in time.
Should you wait for RERA or buy now?
At the current point in time, because of the lower demand seen over the last 2-3 years, property prices across India’s major cities have sunk to incredibly low levels. Buyers have a wide range of options in locations, budgets, amenities and – perhaps most importantly – in developers. In previous times, buyers with budget constraints could only consider projects by builders with doubtful reputations and questionable business practices. This is no longer the case – today, a home in a quality project by a trustworthy and reputable developer is very much an option even within a modest budget.
RERA will take another year to be implemented; meanwhile, there are other dynamics which are changing on the Indian property market. Reduced pricing coupled with attractive deals in most cities, and the fact that more and more fence-sitting buyers have run out of patience and are coming onto the market with firm ‘buy’ decisions, have kick-started the modest but very real recovery we are seeing on the residential market. In Pune, we have witnessed a 25% increase in buying activity in high-demand areas like Undri-Pisoli, Ambegaon, Bhugaon and Wagholi in the last 4-5 months alone. In Mumbai, buying activity in Navi Mumbai, Thane and some other relatively affordable areas has also picked up significantly.
What does this mean for property buyers? Very simply – any revival in buying activity eventually leads to increased prices. Such is the immutable law of demand and supply. Given that demand is increasing steadily even now, property prices will begin rising even before RERA becomes a market reality next year.
What experts say
Industry watchdogs unanimously agree that there is no scope for current property prices to decrease further. Whatever correction in prices could happen has happened, and developers cannot reduce prices further even if they wanted to – doing so would, in many cases, seriously impact their ability to stay on the market. In fact, RERA will mean that promoters will be bound by more procedures, and this may increase the cost of their projects – costs which are likely to be passed on to the consumer. In other words, RERA could be instrumental in inducing cost escalations in many cities.
It should be noted that while RERA will ensure that unscrupulous developers and their business practices will be driven off the market, it will simultaneously ensure that builders with sound reputations and impeccable track records will become stronger.
One of the most important intentions of the new law is to support such developers so that they can continue to serve the needs of property buyers in the wholesome and transparent manner which they are known for.
In short, for buyers who have no intention of dealing with any but the most reputed developers, there is no real advantage in waiting for RERA to kick in. If one is working with a reputed developer, the privileges, benefits and safeguards that it will bring already apply today.
Another valid argument against waiting for RERA before buying a property is that that once the Act is in place, it will become mandatory for builders to invest extra time with regulatory bodies to work along the extensive details of construction plans, clearances, approvals and other details related to their new projects. Paradoxically, this will in fact result in delayed deliveries where the opposite effect was actually intended.
Even though many buyers feel that they should wait for RERA to be implemented before buying a flat, the fact remains that there are already many builders with strong reputations and credible market practices. Buying a property from such a player now instead of later can turn out to be wise decision if RERA results in upward pressure on prices. Also, if one is looking to make the most of current attractive pricing and offers, there is actually no better time than now. The time and effort spent in taking advantage of the favorable market dynamics existing today will prove to be the soundest investment. The sole proviso is that one should only patronize a reputed developer with a good track record for delivery and construction quality.