- 29 December 2017
India’s Real Estate & Infrastructure sector is a significant contributor to the national economy. Over the last seven decades, its journey of transformation and consolidation has been marked with several transformative trends, responsible for changing the country’s urban landscape.
The sector has come a long way – from the early years of unorganised development, implementation and funds crunch, to a planned, organised and transformative realty, spurring urban resurgence. Significant change began in the early 90s post liberalisation, after the National Housing Policy came into existence and the National Housing Board (NHB) was set up. It was around this time that a proper framework — both legal & financial - was created to encourage the involvement of the private sector in housing, with the government’s role changing from provider to enabler.
In 2000, 100% FDI in construction development projects was introduced. Over the last couple of years, we have seen initiatives such as ‘Amrut’ to rejuvenate 500 Indian cities, the ‘100 Smart Cities Mission’ and 'Housing for All’ being launched. However, one of the biggest reforms undertaken in Indian real estate has been the implementation of the Real Estate (Regulation and Development) Act, 2016 (RERA). The Real Estate Bill was passed in March 2016, with a few sections notified in May 2016, and remaining provisions implemented in May 2017.
How RERA benefits buyers
RERA seeks to improve transparency and accountability in real estate in India, thereby protecting the rights and interests of home buyers. The key provisions of the Act include registration of projects with requisite approvals in place before the launch of any project, penalties for delayed delivery, 70% collection from customers to be mandatorily set aside for use in a specific project, and a 5-year defect liability period, amongst others. Consequently, home buyers are now in a position to make better-informed decisions about property in India. The mandatory disclosure of project details, including those of the promoter, land status and clearances, means that consumers now have access to detailed project information at the time of booking.
In other words, RERA seeks to enforce strict guidelines for real estate in India, and monitor regulatory processes for their sale. A set of guidelines have been issued, and following these is mandatory. More importantly, every developer, real estate broker and new project must now be RERA-registered.
Intending home buyers must ascertain the following aspects of the projects they are interested in:
1. The RERA registration number
2. The Agreement for Sale between customer and developer should be based on the ‘model agreement’, as issued by the respective state government
3. Proposed project plan and project completion date on the state RERA website (for eg. https://maharera.mahaonline.gov.in/)
4. Development records for the past 5 years (RERA website)
5. Project specifications and amenities should match information on the website
RERA will pave the way for a stronger and robust real estate sector in India by bringing in greater uniformity in the processes followed by developers, and removing any trust deficit between them and homebuyers. RERA will throw up opportunities for investments in greenfield/brownfield real estate projects.
This is a good time for serious investors and end users to evaluate property in India. While location and connectivity specifications, together with features, amenities and nearby social infrastructure should be considered, brand credibility and prior track record are equally critical, given the inherent advantages to serious players in the current regulatory environment.