The Real Impact of the RERA Act

It’s been over four months since the Real Estate Regulation Act (RERA) came into effect in India. While the much-welcome move from the Indian parliament came as a boon for home-buyers in the country, there were (and still are) a lot of teething issues for developers and builders and the real-estate sector as a whole.

As is known, the RERA Act covers all projects that were still being executed and hadn’t received a Completion Certificate as on the date of commencement of RERA Act, that is May 1, 2017. Thus, many under-construction properties have come under the ambit of the RERA Act. All of these projects had to be registered with the housing regulatory authority, and the developers or builders concerned had to provide regular updates on the approvals at various levels. All these registered properties have to follow the rules of RERA.

• The Much-Needed Respite

One of the highlights in the RERA guidelines is that any real-estate property, be it a luxury apartment in OMR Chennai or a simple 2BHK in a suburban location of Mumbai, will be priced on the basis of the carpet area, and not the super built-up area. As per a report in The Economic Times, BMR & Associates LLP’s Manoj N Kumar, who is a Partner in Direct Tax, has clarified that the carpet area is 30–35% lesser than the super built-up area of a project. The sale of projects on a carpet-area basis can lead to a significant increase in the per-square-foot price of the project, he adds.

• The WIP Bane

The newly introduced rules under the RERA Act bring about a major transformation in the way real-estate dealings have been taking place in India. Switching to the new rules was expected to take some time, especially in the case of under-construction properties that have already seen a lot of paperwork. And, as can be seen, the shifting of gears has slowed down the growth of the sector in many states. The properties that were under construction at the cusp of the switch to RERA are bearing the worst brunt as their regularization and documentation had to be changed midway. And, until these properties get completed, their respective builders and developers are not willing to start off with new projects. This means, there is a lot of pressure on them to complete the ongoing projects and sell them, failing which there will be a pile-up of unsold inventory.

• The DeMon-RERA Impact

Experts express unison in the opinion that the demonetization drive by the Indian government in November 2016 was a blow to the real-estate sector because of the unprecedented and heavy cash crunch that made an appearance without any warning. Add to that, the RERA Act has forced builders and developers to mend their ways and set things straight, and bring about transparency at every level.

The back-to-back moves by the Indian government have taken the businessmen in the sector by shock, and it is only natural that they will need time to ensure things are in order. Until then, the sector is expected to continue facing a slowdown. However, given the motive of RERA to ensure thorough regularization and accountability in real estate, it is believed that the sector will start looking up gradually and that the benefits of the Act will be here to stay.


This is a guest post by Dinesh Dhawde

Reasons Why Demonetization Has Brought about the Right Time to Invest in Real Estate

Much hype is created around the demonetization of the currency and its effects on the real estate sector. The fear that the real estate sector will suffer immensely as a consequence of this decision is, however, unwarranted. In fact taking long-term perspective in account will help us see that demonetization will actually bring some positive changes.

Thanks to the demonetization, India will witness transparency and organized ambiance. From a home buyer's view, this is a welcoming change, as it will place him in a stronger position with so many benefits to reap.

Top reasons why you must invest in realty sector (post demonetization).

• Demonetization has accelerated the flow of money into banks. This excessive money will allow the banks to give out a loan at a cheaper rate of interest. People can avail home loans with ease to build their dream homes.
• Projects that were earlier delayed on account of lower cash will now speed up. Increased cash flow with banks would also facilitate industries to avail loans at better lending rates than what was being offered earlier.
• Better liquidity has resulted in deflation, which in turn has given rise to price stabilization, hence making it a buyer's market. The Reserve Bank of India has more than enough expanse to lower the REPO rates now. If the banks have liquidity, it will help them convert the REPO rate into reduced borrowings for home loans. The rupee is also expected to become stronger in the coming few months, thus increasing the purchasing power of customers.
• Investment in infrastructural construction - Demonetization will lead to a surge in the percentage of money accounted for which will result in an increased collection of taxes. This means the government will have much more resources to invest in infrastructural constructions in India. This will be a win-win situation for the consumers who have invested in affordable projects on the outskirts of the town as they will get more connectivity.

Also, the transformation to cashless economy will make the home buying process all the more transparent and convenient. Therefore, if at all you are planning to buy new apartments in cities like Chennai, Bengaluru, Mumbai, Hyderabad or any other city, keep in mind that this is the right time. The Realty Sector has witnessed a slowdown in the past two years and prices of apartments have dipped by almost 10%.

This is a guest post by Dinesh Dawde