RERA: A Step towards Regulating the Real Estate Sector
Apr 04, 2017 Real Estate News
On 1st May 2016, Real Estate Regulation and Development Act (RERA) came into force after years of deliberate effort. RERA is panned India applicable. RERA is a strict legislation and a strong step towards regulation the real estate sector. RERA aims at protecting the interest of buyer’s so that they receive their property on the promised time. This will increase the buyer’s confidence and will help in creating a better developer brand which will focus on better quality and timely delivery of projects.
Though buyers will benefit from RERA, there are some challenges that it need to overcome. First, RERA mandates only the 70 percent of the amount that the buyer pays for the property. It includes the deed that the buyer pays the construction amount and the cost of land. This will stop the widespread division of the funds and thus delay the projects for years. The drawback of the project is that it lacks the insight at the real estate business. The cost of land includes interest cost and the approval cost which can be higher than the 30 percent of the amount collected by the developer. In case of joint or partnership project, this might not be the issue but the acquisition of land for construction can be an issue.
With respect to withdrawing the money from the escrow account, there is a need to issue the certificate by the architects, engineers, chartered accountants in the ratio of the completion of the project.
Secondly, the ‘Promoter’ has the responsibility for the compliance under RERA and it is quite massive to cover not only the developer but also the land owners and private equity or strategic investor if they take part in actively in marketing and selling the project.
The end user consumer is ultimately the beneficiary if the operations are done timely and the disputes are resolved in time. This will change the face of the real estate world and will make the real estate look more like the manufacturing process rather than money multiplying machines. Only the developers with a proper strategy can survive this.
Though buyers will benefit from RERA, there are some challenges that it need to overcome. First, RERA mandates only the 70 percent of the amount that the buyer pays for the property. It includes the deed that the buyer pays the construction amount and the cost of land. This will stop the widespread division of the funds and thus delay the projects for years. The drawback of the project is that it lacks the insight at the real estate business. The cost of land includes interest cost and the approval cost which can be higher than the 30 percent of the amount collected by the developer. In case of joint or partnership project, this might not be the issue but the acquisition of land for construction can be an issue.
With respect to withdrawing the money from the escrow account, there is a need to issue the certificate by the architects, engineers, chartered accountants in the ratio of the completion of the project.
Secondly, the ‘Promoter’ has the responsibility for the compliance under RERA and it is quite massive to cover not only the developer but also the land owners and private equity or strategic investor if they take part in actively in marketing and selling the project.
The end user consumer is ultimately the beneficiary if the operations are done timely and the disputes are resolved in time. This will change the face of the real estate world and will make the real estate look more like the manufacturing process rather than money multiplying machines. Only the developers with a proper strategy can survive this.
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