Heralding a New R(era)
The much-awaited implementation of Real Estate Regulatory Act (RERA) has ushered a positive change in the Indian Real-estate landscape. For homebuyers in particular, this is the time to bid goodbye to shoddy constructions, stalled projects and delays, and look forward to a transparent industry built on trust and accountability between investors and developers. No longer tilted in the favour of developers, agents and brokers, the Act is also the key to propel Indian real-estate industry towards openness where detailed information regarding projects will be readily available, helping buyers make informed decision based on hard, reliable facts.
One of the biggest positives of RERA is the timely completion of projects, since 70 percent of the money for construction will be locked in the escrow account and withdrawn stage-wise under supervision. In case of a delay, the builders will have to bear the monthly interest on bank loans (if the burden falls on home buyers) for under-construction flats. Moreover, under RERA, developers will need to register all their projects before launch, ensuring that they can only sell a project after necessary clearance. They also have to disclose all relevant details to buyers.
The new Act further ensures that developers reveal to buyers the exact measurement of carpet area – that is, the area within walls. This will help investors understand what they are paying for, unlike the current trend, where only the built-up area is disclosed, leading to misunderstanding and confusion. The builders will also have to provide a five-year warrantee for any structural defect in the constructing, although the specific definition of defects is still unclear.
While largely favouring investors, the new regulation is beneficial for builders as well. First and foremost, it will help clean the industry of fly-by-night builders, giving more room to genuine developers. This in itself will reduce quite a number of disputes, and in the long run strengthen the sector. Moreover, with RERA in place, builders will focus more on completing existing projects, rather than starting new ones, which is good news for industry in general. Therefore, while the regulation does present challenges for developers in its early stages, it was a much-needed step to build customer confidence. Foreign investors, in particular will appreciate the system of checks and balances for its transparency, and the ready availability of information on projects which was not the case earlier.
Given the optimistic scenario, property gurus believe this is the right time to invest in the Indian real-estate. There will be teething trouble, as is usually the case in such paradigm shifts; however, the general sentiment it quite upbeat, with both developers and investors looking forward to a new era in the history of Indian real-estate sector.