The real estate sector in the country is set for a transformation change from May 1, when a Real Estate Regulatory Authority would come into force in each state, as mandated by the real estate law passed by Parliament in 2016
Finally, the Real Estate Act will come into force across the country from May 1, to the immense relief of home buyers and investors alike. This will usher in a new era of transparency in the real estate sector in the country and, perforce, corporation the operations of all developers.
Once RERA mandated by the real estate act, is established by every state, experts expect projects covered under RERA to be completed on time, that too without any deviation from the original proposed plan.
This is likely to improve the confidence of buyers in the system and may, gradually, entice them to buy in projects under construction. Uttar Pradesh and Maharashtra have already notified RERA rules, Haryana and Karnataka are likely to notify the rules soon, so that it is implemented on time.
A government source said that the Union government has asked state governments to include al current projects, where completion certificates have not been given out, under the ambit of RERA, All current projects have been given out, under the ambit of RERA. Al current projects have been given three months, up to July 2017, to comply with RERA regulations.
CRISIL, Top credit-rating agency, said in a report that the period, therefore, is likely to see subdued activity in term of launches as developers prepare to comply with the new norms senior government official said that even those states which have not notified RERA rules and appointed an authority would be require d to do o before July 2017, so that all the current projects may be registered as required by the law.
RERA also does not permit developers to launch new projects before registering them with the regulator. This will be a major shift from the current practice where developers mange to sell a part of their project through soft launch or pre-launch activities, CRISIL said.
Developers will now have to refund or pay compensation to the allotters for any delay in projects , with an interest rate of the State Bank of India’s highest marginal cost of lending rate plus 2%, within 45 days of its becoming due. This would come to around 11.12%.
According to rules, which the central government is pushing gall state governments to follow, developers of current projects should deposit 70% of the amount collected and unused of the completion of these projects within three months of applying of registration of a project with RERA in a separate bank account.
The rules also makes it mandatory for developers to disclose project-related details, including project plan, layout ,a and government approval-related information to customers like sanctioned FSI, the number of buildings and wins, the number of floors in each building etc.
However, buyers will pay only for the carpet area of an apartment which doest not include the common area of a condominium, on pro rate basis. This will force developers to quote higher rates per square feet for the carpet area. In almost all the state government rules, consent of two-third of the allotters is mutt of any major addition or alteration in a project.
Effective implementation of RERA will improve transparency and timely delivery of residential units. RERA is also expected to put an end to fund diversion, and transform the realty sector into a more organized and trustworthy industry, installing confidence of end users, CRISI said in the report developers also say that RERA will bring back biers into the market.
From now on, developers will have to work under an onerous mandate with 70% of all the money collected from the sales of units in a project to customers transferred into an escrow account, which would be used for the construction and meting the land cost of the project.