The deployment of RERA profoundly aims in reshaping the real estate sector with an organized and regulated system. As per the statistical analysis, the 30% of the transactions takes place unnoticed and unaccounted. It is good to know that new set of regulations promises to induce greater transparency in the transactions. At PropTech Solutions, we have directly seen the problems faced by the property buyers in the industry. Many clients of us have come to us after facing bad experience that is sad to hear. The primary problems are:
- The legal procedures were extremely ambiguous.
- The recourse methodologies were not kept transparent.
- Lack of organization of homebuyers.
- Overloading legal procedures.
Key Reasons for Cost Rise
It is anticipated that the expenditure on real estate project development will increase mainly because of the following reasons.
- The developers must maintain separate account where 70% cash flow is enabled.
- Sale of open parking spaces is restricted.
- Common areas should be transferred to housing societies.
- Webpage maintenance, quarterly filings, and monthly updates incurred extra costs.
The three major areas in which real estate industry is facing the obstacles are:
Slow Production: After the deployment of RERA, the new properties are highly difficult to be launched which has ultimately slowed down the production department.
Lesser Purchaser Interest: Due to the uncertainty and lack of accurate information, the demand for purchase has come down.
Lowered Prices: The inventory has been clogged with older projects. As a result, it has to be cleared within the deadline at the lower prices.
Financial Pressure on End Customers
As per the regulations of RERA, the projects must be completed within the scheduled time failing which the builders are liable to penalties. In turn, this time pressure is shifted to the contractors for strict time evaluation during the work progress. As a result, the construction rates increase due to the high demand of quality and speed. Ultimately, the increased prices strike the end customers. On the positive side, RERA promises the overall ownership cost tends to reduce in spite of all these fluctuations.
Major Impacts on Real Estate Market
Clear Price Quotation: The property developers are supposed to make the transparent quotation. The properties can no more be sold on the built-up area instead the price must be quoted for the carpet area. In fact, the carpet area accounts for the actual internal area where the person tends to live. Ultimately, this improves the transparency to the customers and let him know the actual cost per square feet. You are entitled to get the standardized platform that assists in better comparison and analysis before buying.
Eradication of Parking Charge: Generally, the parking charges are accounted separately which ranges from two lakhs INR to six lakhs INR based on the property. After the deployment of RERA, it has been made mandatory to include the parking charges within the sales agreement.
Revised Agent-Customer Relationship: Most of the real estate agents are not well organized and regulated. As per the act, real estate agents must register themselves under the competent authority. This is mainly to avoid the cheating of innocent customers by such unregulated real estate agents. Moreover, the nature of relationship between the agent and the end customer must go according to the standard definitions.
No More Delay: Now, the project completion period will not pose major problems to the end customers. As per the new rule, the developer is responsible for any delay in the project completion status and strictly entitled to monetary penalty. On the other hand, he is liable to the imprisonment of 3 years. Additionally, if the buyer is not satisfied with the work then he has the freedom to claim for a refund in the period of 15 days before buying.
Transparent Legal Documentation: The builders or developers are required to make the transparent and complete disclosure to the end customers. The disclosures pertaining to the following must be made clear with the buyer.
- Title Report of their land.
- Presence of any encumbrance issue.
- Usage of Floor Space Index
- Usage of Construction Technology
- Layout Design Standards.
Property Registration: Initially, the real estate broker must register all the properties under the RERA before making any sales. However, the property must meet all the conditions to be eligible for registration. If any real estate broker sells the unregistered properties, he is entitled to the penalties. As a result, it avoids the dishonest promoters from moving their illegal properties to sale.
Small Properties Regulation: As per the RERA, the properties that are above 500 square feet or area having eight flats should also follow the new regulation act. Consequently, this rule invites all the low-cost housing projects to follow the legalities.
Construction Defects: In most of the cases, the structural defects are not considered as the builder’s responsibility during the construction. As per the RERA, the builders are liable to all kind of structural defects for a period of 5 years after construction. In addition, the land titles must be issued legally in order to prevent the buyer from running into troubles during legal issues.
Most prominently, it is been announced that the state level regulatory department will be set up in order to deal with the real estate disputes and issues at the state level. Here, the end consumer grievances will be tackled in the first place. As a whole, both the customers and builders will receive the advantages of financial transparency. The real estate agency is heading to function transparently and tends to be consumer centric. The new act demands the adaption to these changes by the real estate sector that guarantees the promising future.
For next few quarters, the real estate industry is unlikely to produce new property launches since the builders are occupied with the plethora of ongoing projects. All the builders will certainly face new challenges in complying with new rules of RERA and occupied in accomplishing the inventory held projects strictly within deadline. However, the small-scale and poorly organized industry players will no longer be able to sustain.
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