Real estate to get a facelift under new law
Real estate companies, both residential and commercial, expect the sector to grow significantly after the Real Estate (Regulation and Development) Act (RERA) takes effect.
BENGALURU: Real estate companies, both residential and commercial, expect the sector to grow significantly after the Real Estate (Regulation and Development) Act (RERA) takes effect. Under the Act, the sector is expected to become more organised, making it attractive for foreign investors to come in.
For one, the Act makes it mandatory for all projects to register with the Real Estate Regulatory Authority before their launch. This could provide greater transparency in project making as well as execution. The law will also prohibit unaccounted money to be pumped into the sector and 70 per cent of the money will have to be deposited in bank accounts through cheques. While builders will have to quote prices based on the carpet area, every transaction will be regulated to ensure a timely completion and handover. There will be no room for fly-by-night players once the Act kicks in, say experts.
“The global attractiveness of the real estate sector would certainly improve with the implementation of RERA. It is an ambitious move towards a mature economy, which broadcasts a positive message globally about the Indian government’s determination to cleanse the realty sector. With the anticipation of enhanced transparency and reduced litigations, the inflow of foreign funds is set to witness an uptrend in the forthcoming quarters,” said Narasimha Jayakumar, chief business officer at 99acres.com.
He says complex regulatory mechanisms, low ranking in terms of ‘ease of doing business’, and inadequate transparency in the sector are the major impediments for investments in the sector.
The total FDI in Indian realty between April 2000 and March 2016 stands at $24.19 billion. Foreign fund inflow figures for January-September 2016 alone stood at $2.5 billion.
“RERA will make the real estate sector much more transparent, predictable and stakeholders more accountable. It will make foreign investors much more confident about investing in India. There is competition for the limited pool of global capital and investors will look for appropriate risk adjusted rewards,” said Amit Oberoi, national director - knowledge systems, Colliers International India.
On whether trust factor is an impediment for both domestic and foreign investors in realty, he said, “Not only trust but also the lack of predictability. Investors like to have a good idea on the timelines. Most poor investments have resulted from delayed deliveries, title issues etc.”
According to Rajesh Joshi, managing director of ACME Group, there will be some upside as already, a lot of foreign inflows are coming into real estate. Once RERA comes in, there will be a reduction in supply in the market because today a lot of people are selling projects without anything in hand.