RERA to boost demand, say realty firms
Developers expect housing demand to recover with the implementation of the real estate law from May 1 as it will protect buyers from unscrupulous players, while prices will remain stable due to huge unsold inventory.
The two apex bodies of real estate developers -- CREDAI and NAREDCO -- feel that the implementation of this law will bring paradigm change in the way Indian real estate sector functions, but see some "teething" problems initially.
The two bodies wanted the government to exclude ongoing projects from the ambit of the Real Estate (Regulation and Development) Act, 2016, passed last year by Parliament, but their suggestions were not included in the law.
"Its a paradigm change in the real estate sector. It will protect buyers who have purchased flats in the past. The regulator under the RERA should find ways to help complete ongoing projects and provide relief to home buyers," NAREDCO Chairman Rajeev Talwar said told PTI.
CREDAI President Jaxay Shah said the RERA will increase transparency in the sector and boost confidence of both domestic and foreign investors.
He, however, said there will be some "teething problems", initially in implementation of this law.
Asked about the impact on prices, Shah said: "Supply will dip during this year but demand will improve as buyers will have increased confidence to invest in property market."
Prices will remain stable now but rates could rise by 10 per cent in next six months, he added.
JLL Residential (JLLR) Chairman Anuj Puri said this law literally holds the key to the future growth of the Indian real estate as it has the potential
bring transparency to clean up the sector.
He said the time has finally come for homebuyers in India to breathe free and invest confidently. "No more will unscrupulous smaller builders or even larger organised developers be able to take buyers for a ride," he added.
Asked about the impact of this new law on supply-demand, Puri said the supply is expected to decline in the interim period, but demand will rise as home buyers and investors confidence will improve with implementation of this law.
"Prices will remain stable till unsold inventories are sold. This will take at least 9 months and thereafter we can see some upward movement," he added.
JLL India CEO and Country Head Ramesh Nair said the RERA definitely needs to be implemented in letter and spirit by all the states as this law aims to clear opacity in the Indian real estate sector and make it more buyer-friendly.
Anshuman Magazine, Chairman, India and South East Asia, CBRE, said, "In the long run, we feel that the establishment of a regulator will prove beneficial for the sector. With investor confidence returning to the sector, resulting in greater institutional capital inflows in the long term, we can expect to see the segment in revival mode."
Lenders seeks clarity in RERA
The lenders to housing promoters and builders are feeling unprotected under the new RERA (Real Estate Regulation and Development Act, 2016), regime and seek clarity on safety of their loans.
Lenders who fund developers for real estate projects feel their role is not covered or lacks clarity in the new regulatory framework. They said only home buyers concerns had been addressed if buildets failed to deliver promises, sources said.
Bankers currently use the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act as their last resort to recover dues from the borrowers.
Bank sources indicated that they were in the process of representing before the regulator to flag their concerns and apprehensions.
Though, RERA is to be implemented from May 1, only eight states have enacted the new regulation. Sources said lenders of Maharashtra are taking a lead in this regard as the state has adopted RERA.
Realty companies felt unless lenders' interests were not protected they would stall credit to the sector.
"Unless lenders' interest is protected, it would be difficult for developers to obtain loans for projects," Emami Infrastructure s Director and CFO Girja Choudhary said.
Another problem is repayment terms of loan in new regime, said a real estate industry body official.
So far repayment is linked to money collected by builders. Financiers ask for a certain percentage of money collected from property buyers as project progresses.
"If we have to keep 70 per cent of collection in escrow account under RERA and bankers ask for 30 per cent for repayments, then what amount will be left with us, "CREDAI Bengal s President Nandu Belani asked.
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