Friday, 22 July 2016

How the things may change once the Real Estate Regulatory Bill is implemented

The Bill makes mandatory the disclosure of all information for registered projects like details of promoters, layout plan, land status, schedule of execution and status of various approvals. It seeks to enforce the contract between the developer and buyer and act as a fast track mechanism to settle disputes. The bill prohibits a developer from changing the plan in a project unless two-thirds of the buyers have agreed for such a change. In concise, the bill of 2016 is a big leap ahead which keeps the buyer's point in view and keeps a healthy check on the builder/seller. The bill casts a heavy responsibility on builders, in the form of project registration and mandatory disclosures on a regular basis through a portal to be maintained by the Real Estate Regulatory Authority (RERA). This will ultimately lead to more transparency in the way business is transacted and how information is flown from a developer to a buyer. Moreover, with 70% of their funds parked in escrow accounts, this will encourage developers not to get over leveraged and they cannot use their money on other projects and hence will be limited to projects. All this will eventually lead to a better demand and supply proportion in the market that will help in the price correction in the long run as well.
 The land cost is the highest one has to bear today, and currently, most developers are facing liquidity crises, which will be heightened due to the bill. Also, with cost of raw material and land going up added to which they have to sell on carpet area basis now will definitely lead to price rise.

In cities like Noida and Gurgaon markets, there are a lot of primary market developments.  Especially a market like Noida has over supply in terms of inventory lying unsold. With the passing of the bill and burden of projects coming upon the developers, the number of projects will reduce drastically that will help in the price fluctuations of the property. According to legal advisor, UC Pant of Pant associates, the future of real estate in Noida  is looking bleak as several inventories  are still lying unsold  and lying dormant. The recent announcement by the Noida Authority to hike the stamp duty by upto 2% has also proved a deterrent by many home buyers.  Gurgaon has for long been a witness of the rapid growth in the country over the years, thanks to the presence of MNCs and the ITeS sector. This has also attracted countless NRIs and expats, and brought in a thrilling explosion in Gurgaon's realty sector over the past decade and a half. However, like many other regions, Gurgaon too did not remain unaffected by the slump that hit the country's realty sector, and the past couple of years have been tough for its real estate market. All in all, to sum up Noida city will be affected as there are many small size broker turned builders and they will suffer the cash crunch. Gurgaon on the other hand as big scale developers who will not have liquidity issues and will continue to work with lesser affect on their business.

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