Buyers Have Nothing To Fear, RERA Is Here
Homebuyers are a happy lot today, with all 92 Sections of the Real Estate (Regulation & Development) Act, 2016, coming into effect today. From this day on, consumer would indeed be the king, making the wait of nine years for the proposal to take the form of a law worth it.
"The Real Estate Act coming into force after a nine-year wait and marks the beginning of a new era … The Act ushers in the much-desired accountability, transparency and efficiency in the sector, defining the rights and obligations of both the buyers and developers,” Housing and Urban Poverty Alleviation Minister M Venkaiah Naidu was quoted by media as saying.
While the confidence building among buyers will happen by and by, both consumers and developers are expecting teething issues to arise, and they do have a reason to feel that way. As it stands today, only 13 states and union territories (UTs) have notified the rules in this regard.
Those who are ready to roll
States that have notified the rules include Andhra Pradesh, Bihar, Gujarat, Maharashtra, Madhya Pradesh, Odisha, and Uttar Pradesh. UTs where the rules have been notified by central ministries include Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, Delhi and Lakshadweep.
Also, under the provisions of the law, all existing projects must be registered with the state's regulatory authority by July. This means new project can not be launched without registration. Hence, no new projects can be launched in states where a real estate authority has not been apointed.
What if your state has not notified the rules?
While Naidu and his ministry have been pressing states to stick to the deadline, some states have failed to comply. However, buyers in such states will be protected under the clauses of the Central law. Alternatively, the buyer will also have the option to approach courts against these states. States which reportedly diluted norms while notifying the law will also have to make amends, says the Naidu's ministry.
Playing with numbers
The new law will also upset some existing number games.
Citing industry data, a Press Trust of India report says that about 2,349 to 4,488 real estate projects have been launched every year between 2011 and 2015. This makes for a total of 17,526 projects, "with investments of Rs 13.70 lakh crore in 27 cities, including 15 state capitals".
Cap on launches
While the new law would whet the buyers hunger for real estate, new launch numbers might substantially come down in the short-term, says industry experts. “With the real estate law coming into force, new launches may witness a drop in the short term as developers may wait to see how the new norms turn out,” says a recently released report of PropTiger DataLabs.
The ease of inventory
This rise in demand and dip in supply could be instrumental in liquidating the inventory stock which has been a cause of major headache for real estate developers. The inventory burden is already easing. According to a PropTiger report, there has been a 16 per cent decline in the fourth quarter of the financial year 2016-17 in inventory overhang on a quarterly basis. If it would have taken about 46 months to sell the existing inventory stock in the nine* cities during the quarter ending December, it would take only 39 months to do so in March quarter.
Only the best get to play
According to current estimates, there are 76,000 active players in the sector while about 10 lakh consumers invest in real estate every year. As the law would mandate developers to register their projects with the authority in their respective states and strictly following the norms, the number of active developers is likely to come down substantially. The number of investors, on the other hand, is likely to rise.
What about property prices?
There has hardly been any upwards movement as far as property prices are concerned. In the quarter ending March, property prices remained range-bound in all cities, excluding Hyderabad. According to experts, prices are not likely to move up any time soon. However, they expect an appreciation of as much as 10 per cent in the medium term.
*The nine cities included in the analysis are Ahmedabad, Bengaluru, Chennai, Gurgaon (including Bhiwadi, Dharuhera and Sohna), Hyderabad, Kolkata, Mumbai (including Navi Mumbai and Thane), Noida (including Greater Noida and Yamuna Expressway) and Pune.