Rera Rating coming up in six months, confirms UP Rera
So far, Rera’s role was that of a regulator of India’s real estate industry. What was introduced on May 1, 2017 as the Real Estate (Regulation and Development) Act, 2016 (RERA), is adding more functions under its ambit, with the latest being grading of developers and even putting clearances under the scanner. All this withaviewtoprotecttheinterest of consumers.
According to Rajive Kumar, Chairman UP Rera, “Like Crisil comes up with rating of bonds, rating of companies; we at Rera UP will look at various things. A fair share of grading the real estate developers and their projects will go into how well developers are positioned vis-a-vis Reracompliancesandwewillfactor in customer feedback. We havestarted this trend andother states will follow suit.”
While firming up the methodology, UPReraisalreadyconsulting all stakeholders including Credai, Naredco, Association of buyers, homebuyer groups etc. SaysKumar,“TheTOR(termsof reference) will have inputs from everyone. However, once the methodologyisfrozen, thenthere is no influence.” When asked abouttimeline, heassureswithin six months, andbythenextanniversaryofRera, this will comeup.
Haryana Rera is equally keen to ratethedeveloperandprojects. ConfirmsSamirKumar, Director RERAHaryana,“Wewillbegrading the real estate developers by assigning them a Star rating, from 1 to 5 based on their track record. It will act like whatanISI / ISO is for product and services. We will involve the consumers and the RWAs (resident welfare associations).”
Naredco feels this step is in alignment to other rating certification that already exists in the sector andis being utilized bythe industry stakeholders.
Butto get aReraendorsedratingforadeveloperorprojectswill definitely enhancetheconsumer confidence index. According to Dr Niranjan Hiranandani, National President Naredco, “Thisis part of the newparadigm where Rera compliance defines real estate, andwedonotseeitas reinventing the wheel. However, it shouldnotaddtothetimetaken and/ or project cost in a major way.” HeaddsthatsofarRerahas played a vital role to enhance transparency, setting up a compliance mechanismandbringing in the much-required accountability of the developer fraternity. Thoserealestate developers who play by the ‘rule book’ will not haveanyproblemswithonemore rating process,” says Hiranandani.
Will the authorities come under the purview? Says Rajive Kumar, UP Rera chief, “The presentActprimarilyhasbuyers andpromoters. However, thereis a substantial component which relates to several clearances. As of now, the development authority is not under purview unless they are promoters themselves. So there is nothing in the Act directly that binds them into time-bound delivery. We are working on a system which will ensure that in the first stage, the clearancesprocessbecomeselectronic. If developer applies on 30th Nov 2018, then it’s on record electronically that hehasapplied on that date. In the second stage, theycanensurethatanythingnot meeting the timelines is held to task.”
The Rera rating process is set to empowerthebuyers, thebanks and builders.
According to Shubham Jain, Group Head & Vice President, CorporateRatingsICRALimited, “The grading/rating of project and developers is beneficial for all the stakeholders. A scientific assessment process to have the developers/projects measured against the same yard stick can help the buyers in taking an informed decision while making the investmentdecision. Ascientifically graded project is more amenable to accurate and reliable estimationofthelendingrisks involved. Theprojectownerscan usethegrading/rating asatoolto convey their project developmentandexecutioncapability. A higher grade typically reflects the ability of the developer to complete the project within the scheduled timelines and cost.”
Talking specifically about Rerarating, ICRAspokesperson says that a standardized approach towards benchmarking of projects and developers will be agoodthing for the industry.
It will improve transparency in the market and act as an enabler for the stakeholders to take informed decisions.
Typically, while carrying out therating/gradingofarealestate project anddeveloper, ratingconsultant like ICRAassesstherisks undertwobroadcategories: business risk and financial risk.
Some of the indicative risk assessment criteria include sector specific risks, market position, project composition, project management and quality, legal compliance, past project track record, dispute and litigation track record and customer feedback.
Thisapartfinancial risk determinants include profitability, leverage, cash flows vs obligations, financial flexibility, accounting quality and contingent liability.
Whileassessingthereal estate project, they tend to evaluate the location, appropriateness of executing agencies, level of control and adherence to project schedule, price competitiveness, regulatory risks, contractualarrangement, cash flow vs obligations, transfer of ownership and penalty clauses amongst others. Besides project specific risks, the track record of the developer and its financial position have an importantbearingonthegrading of the project.
Is it easierto rate aprojectthan a developer? Says Jain, “Rating/ grading adeveloper wouldentail awidercoverageofthevariables/ determinants as compared to a project and hence would be relatively complex exercise.”
Developer association Credai has also welcomed this move of Rera rating developers and projects.
According to Jaxay Shah, President, CREDAI National, “RERAhastransformedthereal estate sector byenhancingtransparency and homebuyers’ faith in the industry. Developer ratingsbyRERAisanotherwelcome step in strengthening this trust gained by the developers’ community. As with all regulations under the Act, it will be a smooth transition for theethical developers andanaspirationfordevelopers collectively. Homebuyers stay at the heart of the initiative and will be able to enter transactions with a certainty of fair outcomes.”
Bankersandfinanciersfeelit’s a step in the right direction. According to Rajesh Sharma, ManagingDirector, CapriGlobal Capital Limited, “RERAregistration hasdisciplined the unorganized sector in a big way. Maharashtra is the best example of its implementation. And rating based on RERA registration is a step in the right direction. Lendersarenowbetterassuredofthe completion time lines of the project besides sales and collection discipline in projects.” Yes, the pressure is immense but today we have the means to match up to growing expectations of everyone in the name of Proptech. By the use of technology, we can drive operational efficiency and enhance work life experience in these spaces, and can try to fulfil the wishlist of both occupiers and owners. As India’s first global centre for property technology (“PropTech”), the CoE is the focal point for developing solutions which addresses our client’s need. Some areas of intervention include property management as onecanimproveprocurement and user experience through predictive maintenance and robotics.
Second is real estate transactions as increased automation will help to achieve greater efficiency in leasing and sales including use of blockchain technologies. Next is construction management to disrupt and improve the design and construction of the built environment to enhance safety and productivity outcomes during construction. Finally with data collection, data science and anal- ysis, we can improve the decision makingforoccupiers, investors and managers by applying artificial intelligence and machine learning techniques.
What kind of data is vital to the real estate and how does technology help in using this data?
Today data is the most critical thing. Wemanage4billionsqft of space and people are living and working in our properties. We have all data on rents, buying, selling, rent, vacancy and it’s all about analysing and monetizing this data. One can safely assume that data is the new oil in 21st century. Technology will help in analysing data collected from smart applications. Vital data related to real estate includes history of the property, current valuation, customer location preference, residential/commercial housing trends, cost of ownership, leasing details among others. Data collection and analysis will improve decision making and help to achieve greater productivity and efficiency.
What is PropTech and what is it expected to do?
I would say that what fintech has done to the banking sector, Proptech will do for the property sector. Fintech refers to the use of technology across all financial services and functions. For instance, the simple task of replacing paper-based processes with software andapplications is an example of fintech at work. Similarly, Proptech is pioneering new ways to integrate technology into mainstream offerings in real estate like AI (artificial intelligence) for customer services, Virtual reality (VR) and Augmented reality (AR) for immersive design processes and similar others.
Where does Indian real estate industry stand on the technology curve as now?
TheIndian real estate industry is witnessing rapidly evolving tech business models - not just in terms of construction, but even in terms of simplifying the buying process with real estate brokers and agents slowly adapting to the newer technologies. The sector is moving towards utilizing an immersive mix of technology such as artificial intelligence, machine learning and An important aspect of proptech is a strong focus on cyber security as the rise of the implementation of smart-building technology and various user apps can lead to increased hacks or unauthorised access of building. In real estate, the adoption of blockchain would rewrite the industry in four ways: disintermediation, fraud prevention,
Money 2.0 (a novel currency concept designed to empower anyone – not only central banks – to issue money), and smart contracts. Artificial Intelligence has the potential to transform the real estate industry in a number of ways such as machine learning in search engines that could precisely address a customer’s needs and adapt with their changing preferences. Besides, VR / AR are expected to change construction anddesign process. 3D printing could transform the commercial real estate market considerably, especially in the project development vertical as it enables construction activities to be faster, of a higher quality and at lower costs. Finally BIoT, or Blockchain andtheInternet of Things would certainly unleash a whole new range of services and businesses. For example, it would allow entities to access real-time data from sensors and moreoverthedata wouldbefully protected thanks to blockchain.
Finally, why did you choose Bengaluru to launch this technology centre?
DEVELOPER ASSOCIATION CREDAI HAS ALSO WELCOMED THE MOVE OF RERA RATING DEVELOPERS
We looked at several parameters before we decided on Bangalore. These were availability of talent, cost of talent, availability of real estate, cost of real estate, social and physical infrastructure and we found Bengaluru topping the charts.
RERA compliance will define realty in the future