HYDERABAD: After a delay of two months, the Real Estate Regulations Act (RERA) is expected to be notified in the state within a week. This was indicated by municipal administration and urban development minister K T Rama Rao here on Friday. Though the legislation was expected to come into effect on May 1 this year, only 18 states and 10 Union territories have notified it so far.
The muchawaited Act has thrown the real estate sector into a tizzy. It will discourage small-time developers, who form about 50 pc of the industry, from initiating projects using buyers’s money. The sector is in a cautious anticipation regarding fluctuation in property prices, with some wondering if pre-RERA property rates would see a drop.
RERA makes it compulsory for realtors to deposit 70 pc of the project fund collected from buyers in an escrow account. Its regulatory body at state level will release the escrow funds to the builder only after completion of the project. “Many builders feel that there are several restrictions in RERA that it will be difficult to enforce it. It will be difficult for builders who abuse people’s money and easier for those who rely on external funding or equity investors or banks.
They already have escrow accounts with them,” said Harischandra Prasad T, chief executive officer, Western Constructions. “It will be tough for small builders as they have to put in their money. They have to wait for completion of a project before taking up another.
This means there will be a lag of one year to start a new project. They will be worst-hit,” he said. After failing to notify the Act, MAUD set up a committee to draft the rules for state RERA and these rules have no been made public yet. “RERA is not something that I have brought in. It is a Union government’s legislation and we are only framing the rules for it. My primary concern is home buyers,” Rao said.