What do 71 years of independence mean for India’s realty industry?
In case of project delays, buyers have the right to - (i) Seek withdrawalofbooking(the developer is liable to refund the entire amount along with interest) (ii) Go ahead with the project (with the condition that developer will pay interest for every month of delay until the property is ready for possession). The maximum time for refunding the buyer’s investment is within 45 days of it becoming due.
2. Facility to check RERA registration number
All builders havetomandatorily register their projects under RERA with the respective state regulatoryauthorityandobtaina registration number for every project. Without RERAregistration, developers are not allowed to sell the project. The project details, construction progress, commencement/occupationand other certificates, sales details, etc. mustbeupdatedonthesinglepoint information window i.e. RERAportal, atregularintervals.
3. Financial safety via an escrow account
Homebuyers’investmentscanbe consideredsafe, asRERAobliges developers to deposit at least 70% of thebuyers’moneyreceivedfor a particular project into an escrow account. This prevents the developers from ‘rolling’ these funds into other projects. The rolling of funds was a major reason for project delays in the past.
4. Ability to verify the builder’s track record
Buyers can now opt for properties onlyfromreputeddevelopers who are complying with RERA norms and have a good track record and financial stability, which can be verified by buyers.
5. Transparency in advertisement and marketing collaterals
Developers can now promote a project only after registering it with RERA. The unique RERA registration number has to be published with every advertisement/brochure, orinanykindof project promotion at all.
6. Clarity on carpet area
Thehitherto conventional practice of developerscharginghomebuyers on the basis of the super built-up area no longer works. Under RERA, the quoted price has to be mandatorily based on the carpet area of the property. Whatyouseeiswhatyouget(and buy).
7. Strict norms on building changes
Around2/3rd of the buyers’ con- sent in aparticular project is necessary in case the developer intends to modifythebuilding or layout plans/specifications/liabilities in the project.
8. Facility to check payment plans
Homebuyerscandoduediligence beforeoptingforaparticularpayment plan, a variety of which developers now offer - including flexi-payment, down-payment, possession-linked andconstruction- linked plans.
9. Booking amount cannot exceed 10%
Developers can only take 10% of the total property cost as a booking amount while the sale agreement is drafted at later stages. RERA prohibits developers to accept morethanthis. If guilty of charging more than 10%, the developer potentially invites a penalty of imprisonmentofupto 3 years.
10. Brokers must be registered under RERA, too
Asserviceproviderstorealestate consumers, propertybrokersare also liable for all deliverables committedbythedevelopersthey represent. Hence, they mustregister themselves with their respective state Regulatory Authorities.
11. At long last, a reliable redressal mechanism
RERAprovidesastrongredressal mechanism to consumers by imposing a penalty on developers/brokers for any breach of obligation. Homebuyers can file complaints against developers/ brokers which will mandatorily be resolved in a span of 60 days from the date of the complaint.
12. Structural defects must be addressed
In case of issues within the building or apartment, such as inefficient plumbing, visible cracks, etc. in the initial five years after possession, developers are liable to rectify the defect in less than30 daysorelsegivecompensationto the buyer.
13. Availability of land title documents
These vitally important documentswere, moreoftenthannot, inaccessible to buyers before RERA. Now, they can scrutinize documents related to a project’s landtitle ownershipontheRERA website.
14. Goodbye to soft/prelaunches
RERA has put a complete halt to soft launches, pre-launches and anyother interpretations of sellingsomethingwhichdoesn’texist as yet. As a result, speculators have now been pushed out and themarkethasturnedextremely buyer-friendly.
While many states are still in the process of notifying their RERA rules, there has been continuous fretting about the dilution of the rules recently notified by many states. There are multiple changes made by different states in the RERA proposed initially by Central Government. Dilutioninongoingprojects’definitions has left a huge number of projects out of the RERA ambit and is understandably a major concern for existing buyers. To keepthespirit of RERAalive, the Government should try to keep RERArulesalignedandeffective across all the states, while balancing the interests of both buyers and developers. In the 71 years since India gained independence, the country’s real estate market has changed tremendously. While it has not always been consumer-favouring throughout this period, it is certainly so today. Thecountry’s cities have expanded, new economic drivers have come in and jobs are being created at all levels.
Likewise, appropriate housing is now being created for all income levels. The current Government has taken the needs of the people to heart and deployed various policy initiatives to ensure that homeownership becomes affordable and desirable.
Like the real estate market itself, the market for housing loans has become very competitive, giving consumers the edge of choice. Moreover, property prices have also rationalized across the country after the Government’s demonetization move late last year.
While it was initially expected that only the resale homes and land markets would be affected, it quickly became evident that the lowered sentiment had percolated in primary sales as well.
Many of the most important changes to positively impact home buyers in India so far have been at the policy level, while others have been induced by advances in technology:
The Internet has opened up the ability for everyone to do their own basic research and shortlist locations, projects and properties that suit their needs
Housing loan interest rates are hardening, but if we consider that they were as high as 16% per annum in the ‘90s, they are still quite attractive
Buyers’ bargaining power is at an alltime high today
RERA is clearing fly-by-night operators from the market, leaving only credible and reliable players who are bound by law to adhere to their assurances onthe market
The economy’s opening up with a plethora of new employment opportunities has, among other things, also led to the emergence of dual-income nuclear families with vastly enhanced home buying abilities
Buyer sentiment today
For a long time, India’s independence did not have too many favourable connotations for aspiring home buyers. Their disadvantageous position had a lot to do with the fact that the real estate market was largely held hostage by developers. Today, this scenario has changed significantly. Over the past two years, we have seen the decisive return of consumer power on the market, with the arrival of the Real Estate Regulatory Act (RERA) providing the final edge.
While RERA is still experiencing teething troubles, it is for certain that it is here to stay - finally putting buyers firmly in the driver seat. The Act is by far the most convincing manifestation of independence for home buyers in modern-dayIndia, promising to eventually bring the residential property market on par with international standards of transparency and accountability to consumers.
HAS DONE A LOT MORE THAN JUST OPEN UP THE INDIAN REAL ESTATE MARKET’S TOPOGRAPHY.
A gamechanger called GST
GST is a major step towards financial transparency, which can be read as freedom in the context of real estate if we consider the previous complex and often opaque layers of taxation which applied to real estate purchase as bondage. Most of the previous taxes have been consolidated under this one tax, and, having greater clarity about how much the final price of buying a home frees the mind from uncertainty. GST is a clear manifestation of a rapidly evolving nation which intends to make itself more attractive to consumers as well as foreign investors. Its implementation wasnotwithout a struggle, but it was a clear need in a country which wants to portray itself as progressive, open and accountable. In that sense, it is certainly a symbol of liberation.
As a clear work in progress, GST is still in the throes of its own ‘ freedom struggle’ as it aspires to live up to the ‘ one nation, one tax’ promise. One of the major hallmarks of a fully developed nation is a transparent, fair and progressive financial system. As a developing rather than a fully-developed country, India must aspire towards global benchmarks of progressiveness, and GST is indubitably a major move towards this aspiration.
Technologyenabled consumer power
The Internet has done a lot more than just open up the Indian real estate market’s topography. It has also brought with it a greatly rebooted job market - not only in terms of IT/ITeS jobs but almost all industries as a whole. Today, India is leading from the front in terms of Infotech-enabled businesses, with e-commerce and a thriving start-up culture driving economic growth.
Housing for All by 2022?
In 1928, the US presidential campaign by the Republican Party promised Americans ‘a chicken in every pot and a car in every garage’ if its candidate Herbert Hoover won. Probably nothing else could have captured the spirit and specific needs and aspirations of those times than this promise. It was made a time just before the Great Depression began to spread its dark wings over America in 1929, and was already sending out signs of its coming.
Asofnow, the incumbentGovernment’s ‘Housing for All by 2022’ vision may seem overly ambitious. According to a recent report by the Government report, the shortage of urban housing in India has reduced from 24.7 million, estimated at the start of the 11th five-year plan 2007 to 18.78 million in the next five-year plan 2012-2017. A shortfall of close to 19 million homes is not inconsiderable.
Nevertheless, as an electoral promise, it remains uniquely evocative and relevant for Indians today. Indeed, a roof over every Indian’s head would be the most compelling deliverable for any Government to actually deliver.
Canthis dreambeachieved? A lot would depend on:
• Making land for affordable housing available where it is needed the most
• Making the creation of mass housing a more attractive business proposition to developers
• Creating single-window clearances for mass housing projects to ensure minimum delay for such projects • Ramping up infrastructure deployment in newly emerging areas where affordable housing can be created • Offering further incentives for budget- strung first- time homebuyers Definitely, the Government has within its grasp the means to make it happen. Perhaps Independent India will indeed see this ambitious goal achieved by 2022. For now, however, we can still look back with justifiable pride and satisfaction over the milestones already crossed.
Over 71 years of variable economic growth led by different industries and subjected to rapidly changing market environments, India today stands heads and shoulders above other emerging countries.
Like the real estate market itself, the market for housing loans has become very competitive, giving consumers the edge of choice.
The arrival of the Real Estate Regulatory Act (RERA) in March 2016 brought in a paradigm shift in the sector and metamorphosed it into a more mature, systematic and regulated one