Thursday, September 13, 2018

RERA Effect on Real Estate!

"Real estate is one sector that India is not very proud of"…. Kushal Pal Singh.

Kushal Pal Singh Tewatia is an Indian real estate developer, and the chairman and CEO of real estate developer DLF Limited, founded by his father-in-law Chaudhary Raghvender Singh. DLF has an estimated land bank of 10,255 acres, with about 3,000 acres being in Gurugram, called DLF City. Well, with a quote like that to start my sharing many of my fellow professionals (read builders) would have frowned but then the person who said those words himself is one of the top builders in this very country, so I didn’t said it! And frankly to celebrate (read analyze) fifteen months of RERA era (read a year) I couldn’t found a better quote than this as unless you accept something is wrong when things are going wrong, you won’t ever make them right! And indeed real estate which was on down fall since last three years clearly hasn’t been showing good outcomes post RERA. When we say real estate doing good or bad then it has always got two sides i.e. it’s doing good for builders or for homebuyer! Unlike any other industry when an industry is said to be doing good then it has to be a win-win situation i.e. automobile segment is doing good means, bike/car makers are happy as well the customers too are happy with what product they are getting! But then that’s why real estate is different here builders(read homemakers) & clients (read home buyers) are never on one side but always aiming guns at each other’s like Bharat-Pak border! So when real estate is said to be doing bad its mostly against developers but the flat holders should be happy as the homes have definitely become dearer (read cheaper) post RERA, though that wasn’t the outcome RERA has been formed for!

With increasing complaints about the builders by the customers to regulate the real estate sector, the government came up with the idea of Real Estate Regulatory Authority (RERA) Bill which is expected to help buyers. RERA is supposed to protect the interest of the homebuyer and ensure timely delivery of projects. Real Estate Regulatory Authority (RERA) Bill was introduced in 2013 and finally the bill got approved in March last year. Although RERA is a central law, its implementation will depend on state governments, as real estate is a State subject. Maharashtra government had approved the Real Estate (Regulation and Development) Act (RERA). The deadline for online submission of realty projects under RERA was, July 31, 2017 & finally RERA has arrived in our State, its applicable for mostly every for every project where real estate development is being done in any form i.e. residential, commercial, co-operative societies, layout of plots & any such development. Even the real estate agents are also required to have RERA registration. There is lots of information available on many portals about RERA & its applicability, so no point in using more word space here, let’s get in to the scene now after nearly fifteen months of its entry in real estate…

At a recent summit in our very Pune to take review about implementation of RERA in country, Hon Central Housing Minister praised govt’s especially Maharashtra Govt about RERA implementation as well warned the States for not diluting RERA act (read provisions in it). Indeed Maharashtra is law abiding State (read most & not the only law abiding State or else other States will jump at me), all figures are available on RERA web site yet will share just one aspect, out of nearly 32,000 registrations of projects & agents in the country, nearly 17,000 are from Maharashtra alone! Do I need to say more about the way our State is ahead of others & full credit to State govt as well the builders & agents here, as do mind any law is successful only if people follow it willingly! Another reason is Maharashtra is definitely ahead in planned urban growth & obvious it’s the planned urban development which is more law abiding & that’s why you see more registrations here. One more aspect is developers from Pune & Mumbai & their willful attitude towards RERA as even out of 17,000 registrations from Maharashtra nearly 75% is from Pune, Thane & Mumbai making them front runners in RERA implementation yet most complaints are from this belt only!

Whenever its mention of RERA, two questions are often asked, whether the prices of homes has come down due to RERA as well has the service of the developers improved post RERA? Well, as I said RERA was never meant to reduce or increase prices of the real estate (read homes) but it’s brought in to make real estate to adopt fair practices for the home buyers. In making so there has been few provisions such as not accepting money more than 10% unless registration of agreements. This has driven away the investors as earlier investors used to block the flats by paying some money to the developers without doing any agreement by saving on nearly 6% on stamp duty & plus equal on taxes like service tax/vat (now GST) & then selling the flat later stage at premium. This has been stopped; obviously the premium aspect is gone from the real estate so is appreciation, making homes cheaper. And then the developer is supposed to use the money received from the booking only for the construction of the said project, thus there is huge reduction in new land deals which builders used to buy from booking amount of any project & hold on the said land, again a way of appreciation of land prices reflecting in end product i.e. home’s price rise! These two things surely have driven prices of homes to settle at a datum if not rise & that itself is huge price reduction! And then as the real estate agents also are needed to be registered under the RERA & so are their transactions, that also has helped to wipe out the margins these agents were keeping in the home deals which is one more price affecting factor!

Now coming to the service to the customer, because of RERA at least now exists a forum which is solely dedicated to the real estate issues & do mind RERA has provisions to protect builders also from the bogus or ill minded customers! Major complaints from the customers against the builders were only two or three i.e. delay in possession or rate hike in mid way or deferring from the commitments made such as not giving the shown amenities/room dimensions, changing location of the flat within the complex! I think with RERA in many of the builders have realized it will be difficult to get away by doing so & then if some builder still does so, then the customer has avenue available to give justice & in time. In Mumbai & Pune the builders associations i.e. CREDAI has gone a step ahead & has formed RERA committees along with panel members form NGOs’ to sort out the dispute between clients & builders before it goes to RERA authority & sorting out such issues as per RERA guidelines! This in itself is great move which acknowledges success of RERA as this is what the act for, to assist customers as well builders too in the deal they have entered in! Finally lets accept that there will be good builders & there will be bad builders always & good builders will definitely follow not just RERA but any such act because their basic principle of doing the business is good i.e. keep your customers happy & all will be fine! Where as bad builders will just follow the age old crime philosophy, make people fool & you make fast money! RERA or not, ultimately it’s the client who has to decide whom he or she deals with for his home. As RERA will surely help in punishing the criminal elements of real estate but then do mind justice doesn’t always means giving you what you wanted to have in first place! In many cases recently even RERA has thrown up hands by just de-registering the developer or his firm as the said company is clearly unable to give possession of the flats due to their financial mess (read unable to complete the project), now what should the flat holders of such projects do as just de-registering some project, the project is not going to get completed! I think there are yet many gray areas even in RERA as its just one year old, sure both, govt as well builders ( read good builders) knows the limitations of young RERA & will come up with proper amendments, till then its real estate customers who should realize that no law can govern any industry but the customer!

Just one aspect here, can RERA be applicable to govt also? As when its question of transparency, commitments & ethical practices then look at the ever changing policies of our govt regarding real estate, making business nearly impossible. Right from delay in sanctioning development plans of the cities to providing basic civic infrastructure like water, roads, power, drainage etc, govt is failing on every front. Because if RERA is for the benefit of end user (read home buyer) & to see that whatever he or she has been committed gets delivered Then what about bad roads, poor water supply & absence of other civic infrastructure which is supposedly responsibility of the govt (PMC, PMRDA & PCMC types). Let’s do mind, via millions of rupees being collected through the premiums, developments charges & many such govt is also beneficial party to the entire deal of a home! And if by accepting mere 2% of the deal if we are bringing real estate agents under the RERA then why not make the respective govts’ (read civic bodies like PMC) also party to RERA for their committed role in providing infrastructure to these homes! As in the form of collecting all the taxes as well premiums, govt also is beneficiary from real estate development is a fact!

There is one big hurdle in real estate which makes builders as villain in eyes of RERA & that’s State Govt’s failure on various urban issues; I am not dishonoring verdict of Hon Court but in last few incidences banning new construction seems has become motto of the system, reasons of which we will surely discuss but have a look at this; local bodies (read like of  PMC, PCMC, BMC) are unable to supply enough water to the residents, stop new constructions or giving permissions, the civic body doesn’t have a drainage net work, stop new construction, sand is being excavated from the rivers, stop new construction, hill top hill slopes are being encroached, stop new construction around them, streams/ natural water ways are being shrunk, stop new constructions around them,  air port’s suddenly realized their flying norms, stop new constructions, defense establishments has changed their boundary norms, stop new constructions, environment clearance violence has been observed in some case, stop new construction & the list is ever growing! All the Hon Court’s decisions against construction which are outcome of respective State govt’s or Central govt's incapability does affects construction speed as well bookings & in the end it’s the builder who has to pay in the court of RERA as Govt’s job is done with bringing RERA in but it’s the builders who has to build & deliver the homes which this country’s citizens are only going to live!!

Sanjay Deshpande 
Sanjeevani Dev.

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