’Reg­u­la­tions in In­dia are sim­pler in than West Asia’

HT Estates - - HTESTATES - Ashwini Kumar Sharma ashwini.s@livemint.com

NEWDELHI: Af­ter RERA was im­ple­mented, Kar­nataka has the sec­ond most pop­u­lated real es­tate reg­u­la­tor web­site, af­ter Ma­ha­rash­tra. J.C. Sharma, vice-chair­man and man­ag­ing di­rec­tor, Sobha Devel­op­ers Ltd, which is based in Ban­ga­lore but has a pres­ence in var­i­ous parts of In­dia as well as West Asia, shares his views on the reg­u­la­tory trans­for­ma­tion and out­look for the real es­tate sec­tor. Edited ex­cerpts:

How have the past few years for res­i­den­tial real es­tate sec­tor been in terms of reg­u­la­tory changes, de­mand and sup­ply, and prices?

Year 2017 has been a year of struc­tural tran­si­tion at mi­cro and macro lev­els. At the macro level, there was de­mon­eti­sa­tion; then im­ple­men­ta­tion of Real Es­tate (Reg­u­la­tion and Devel­op­ment) Act (RERA), 2016, from 1 May 2017; and Goods and Ser­vices Tax (GST) im­ple­men­ta­tion from 1 July 2017. The gov­ern­ment also came out with sev­eral ben­e­fits for the af­ford­able hous­ing seg­ment. The struc­tural changes had pos­i­tive and neg­a­tive im­pacts since devel­op­ers were not ready. Oth­ers, too, were not ready for de­mon­eti­sa­tion. The econ­omy was not ready for the tran­si­tion to GST regime from value-added tax (VAT) and ser­vice tax regime. Ear­lier only 6 mil­lion peo­ple were regis­tered un­der VAT; now the num­ber has crossed 10 mil­lion un­der GST. So, it’s a great tran­si­tion. Sim­i­larly, devel­op­ers were not used to launch­ing projects with all ap­provals. They would launch as per their will, col­lect money, get ap­provals... there wasn’t any process.

So when we talk now, we need to un­der­stand what would have hap­pened if the gov­ern­ment had not taken those steps, and what is hap­pen­ing de­spite those steps?

What we have found is that new launches have come down dras­ti­cally. Year 2017 will be re­mem­bered for the low­est num­ber of launches in 10-15 years. I doubt if any price ap­pre­ci­a­tion hap­pened, though in­ter­est rates were com­ing down. It was also the year when the in­dus­try rec­og­nized and re­alised for the first time that if it doesn’t pre­pare for the changed en­vi­ron­ment, it won’t have any role to play.

As far as de­mand and sup­ply are con­cerned, there is pent up de­mand. Sales are down due to the reg­u­la­tory changes, but sup­ply is grad­u­ally re­duc­ing. Trans­ac­tions are hap­ping, though at a slow rate; new launches are al­most nil. In the fu­ture, when sup­ply dries up or re­duces, and de­mand picks up, cou­pled with in­fla­tion, prices will also go up.

How was the tran­si­tion for your com­pany?

It was smooth for us. There were hic­cups in the ini­tial stages, but not any­more. I think we have regis­tered about three dozen projects, with­out any prob­lem. Once you re­alise that there will be prob­lems in the ini­tial stage, you are not ag­i­tated. In­stead of crib­bing and cry­ing, we em­braced it. We knew RERA is good for cus­tomers, and we knew that if it is good for cus­tomers, it is good for devel­op­ers and the real es­tate sec­tor. We be­lieved in RERA; and we be­lieved that devel­op­ers have to walk the talk.

Sobha Devel­op­ers also has projects in West Asia. How strin­gent are real es­tate reg­u­la­tions there? Is RERA at par?

RERA is much sim­pler in In­dia than (the rules) in West Asia; for devel­op­ers as well as home buy­ers. Here, devel­op­ers have been given the right to with­draw 30% of the pay­ment re­ceived from cus­tomers. There you are not al­lowed to with­draw any money, till you have all the money to build. The cus­tomer too can’t with­draw book­ing at will; oth­er­wise, he will have to pay a hefty penalty for with­drawal.

So from both per­spec­tives, Dubai real es­tate reg­u­la­tions are far more strin­gent than RERA. Devel­op­ers are not even al­lowed to take money from the es­crow ac­count, even for the land. Though with­draw­ing for ar­chi­tec­tural fee and over­heads is al­lowed, this is just 2-4%.

Where does RERA lack? What are the things that you think should be added or amended?

Ac­cord­ing to me, this (RERA) is evolv­ing. As the econ­omy, and all the stake­hold­ers—be it banks, gov­ern­ment, devel­op­ers, cus­tomers, ven­dors, or mu­nic­i­pal au­thor­i­ties— evolve and start to un­der­stand that they have to im­prove, changes will keep hap­pen­ing. How­ever, while we are re­spon­si­ble for com­plet­ing projects, the oc­cu­pancy cer­tifi­cates, no-ob­jec­tion cer­tifi­cates, en­vi­ron­men­tal clear­ances... all these things are with a third-party. Even power, wa­ter and other util­ity con­nec­tions, and cer­tifi­cates needed af­ter com­ple­tion are not un­der RERA purview. It is a valid de­mand to bring these also un­der RERA.

The gov­ern­ment has given a push to af­ford­able hous­ing, and there is a lot of de­mand from home­buy­ers too. What is your com­pany do­ing in this seg­ment?

We are try­ing to give more fo­cus to af­ford­able hous­ing, though we have been do­ing it for long. Our project, Dream Acres, was launched be­fore the af­ford­able hous­ing schemes were launched. It hap­pens to be Ban­ga­lore’s largest ever sin­gle hous­ing project with 6,945 apart­ments, with an av­er­age size of 1,040 sq. ft. built-up area.

Another project that has been re­cently ap­proved by Ban­ga­lore Devel­op­ment Author­ity (BDA), has about 1.8 mil­lion sq. ft, con­sist­ing of about 1,800 units. In Ban­ga­lore, there are two pro­cesses: first you need to have ap­proval from BDA and then from Bruhat Ben­galuru Ma­hana­gar Pa­lika (BBMP). We are look­ing for­ward to get­ting ap­provals and will launch the project in the next fis­cal. With the em­pha­sis that the gov­ern­ment is putting on af­ford­able hous­ing and the huge de­mand at the bot­tom of the pyra­mid, this seg­ment is likely to emerge.

Do you think gov­ern­ment in­cen­tives are enough to at­tract home buy­ers and devel­op­ers?

I per­son­ally be­lieve that the gov­ern­ment has done much more than what we could have an­tic­i­pated. For in­stance, it has tweaked the size of apart­ment to be con­sid­ered un­der the af­ford­able hous­ing pol­icy; it has given fi­nan­cial in­cen­tives; re­duced the ap­pli­ca­ble GST; given in­come tax ex­emp­tions, and so on. Some­thing can al­ways be added, but we live in a free econ­omy, and in a com­pet­i­tive en­vi­ron­ment, so we should not ex­pect more.

But if I still have to ad­dress your ques­tion, I think it (real es­tate) is a state sub­ject, and state gov­ern­ments must be more forth­com­ing in giv­ing ap­provals, and giv­ing oc­cu­pancy cer­tifi­cates. Be­sides that, though the cen­tral gov­ern­ment is in­cen­tivis­ing, state gov­ern­ments should be more proac­tive in pro­vid­ing the re­quired in­fra­struc­ture, for af­ford­able hous­ing to de­velop. Take the ex­am­ple of Dwarka Ex­press­way (Delhi NCR). In­fra­struc­ture devel­op­ment should have hap­pened 10 years back; it is still not com­plete. In the mas­ter plan, agri­cul­ture land on the right side of the ex­press­way was ear­marked as de­vel­opable land. Li­cences were given and huge in­vest­ments were com­mit­ted. Giv­ing li­cences to­day and not pro­vid­ing in­fra­struc­ture later should not hap­pen.


J C Sharma

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