Real state of Real Estate Bill

Real state of Real Estate Bill

The bill is aimed primarily at ensuring that real estate projects around the country have to follow certain guidelines from the government to ensure that the interest of the buyer is protected. It is being hailed as a welcome step to put an end to the legal anarchy prevalent in the country when it comes to the activities – chiefly administrational and financial nuances – of real estate agencies. However, this doesn’t mean that your real estate ventures are protected by the act with immediate effect, since a lot of work has to be done by state governments over the next six months in implementing the act into the working order of things before this development would reflect in the life of the common women and men.  Moreover, real estate developers also have to acclimatize to a number of policies and regulations once the act has been implemented in each state.

Based on the final documentation submitted by the parliament earlier this month, the act will address the some key issues with India’s real estate industry.

The bill is created to form a regulatory body to guard consumers and also address disputes and improve the image of the real estate industry as a whole.  With every step taken to transform an industry, there come its own pros and cons.  The real estate bill became an act on 1 May 2016 and has now initiated the entire process of revolutionize the way real estate is developed, marketed and purchased in India. Talking about its key advantages, one needs to highlight its benefits provided to the end users. It will make the process of real estate investments and business proceedings much more streamlined and transparent, benefiting the buyer in the long term and avoiding several conceivable routes to malpractice.  Moreover,  A legal umbrella for the protection of consumer rights will be included in future real estate investments. The major advantage for the buyer in lieu of this bill is that the bill provides for mandatory registration of all projects with the Real Estate Regulatory Authority in each State. Moreover, the registrations of agents with the state authority have become requisite. Moving towards the organized culture of doing real estate, this will make the sector more lucrative. The end user today is a corporate professional or an entrepreneur who likes to be dealt professionally. The brokerage profession with the right direction accompanied by mandatory trainings is heading towards filling this industry with NEW AGE BROKERS. The bill also states to enforce the contract between the developer and the buyer and act as a fact track mechanism to settle disputes.

Keeping the best interest of buyers as the focus, Developers who refuse to follow the guideline stated by the act will be fined severely, and redressals as fast within 60 day periods would be enacted.  It will ensure that only developers with viable business proposals and plans for future development would remain the market.  Delays in project launches, lack of transparency, lack of legal aegis and information, delays in dispute resolution, fraudulent practices and so on will be dealt with. 50% of the money invested by developers would have to be kept in an account that can only be used for the purpose of construction – this would prevent incidences of theft and misappropriation of funds.  A developer cannot change the project plan without the consent of 66.6% of the owners of plots/flats part of the project. Hurdles for developers have increased. There will be no pre launches before mandatory approvals and the builders will be liable for structural defects for 5 years as against 2 years. All these amendments will be a challenge for a developer were as a buyer will benefit as this will lead to smoothness in blocked process of buying a home.

While all this seems brilliant and there is no doubt that the implementation of the act would lead to an amelioration in the way the real estate industry functions, there are a number of things that could be improved about the act, or things that should have to be monitored so as to prevent future mishaps. As a buyer one needs to watch out a few points in the times to come ahead. The state and local authorities play too big a role in approving individual projects and then following up on them until they are completed. A major point that needs to be kept in mind is that these regulators should not become approval hurdles themselves that will just add another tedious step for developers to get their requisite approvals for the project.  Also with parking on funds in separate account, the burden on developers will increase and the developer might transfer that to the buyer by increasing his property prices. 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. Ambiguities in terms such as “carpet area” might lead to problems with standardization in future legal issues. Though the Model Bye Laws being approves by governments has shown that the government is all hands in favor of streamlining the approvals but still the Lack of “single window” clearance of projects implies that the clearance of projects to be taken by builders have a tedious task ahead.

Overall, the act can be proclaimed to be a successful venture by the government of India and concerned authorities are awaiting its implementations in all corners of the nation. This is just the beginning. The Indian real estate sector is in the right direction. With the full backing of Government, it just needs the fraternity to take the responsibility to support the initiative and move along in positive direction.

The Road Ahead: Real Estate Bill

The Road Ahead: Real Estate Bill

The Indian real estate market has seen a sea change in terms of development in the recent years and thus, industry experts are keeping high hopes that the market will gain its reputation after the implementation of RERA in each state. It has been accumulated that the real estate sector will generate revenues worth US$ 180 billion by 2020 against US$ 66.8 billion in 2010-11. The Real Estate (Regulation and Development) Bill, 2016, became an act on 1 May 2016, initiating the entire process of establishing the guidelines to protect the interest of home buyers in India. As one of the industry expert recently said that RERA is formed to revolutionize the way real estate is built, sold and consumed in India. It is being hailed as a welcome step to put an end to the legal anarchy prevalent in the country when it comes to the activities – chiefly administrational and financial nuances – of real estate agencies. However, this doesn’t mean that their real estate ventures are protected by the act with immediate effect, since a lot of work has to be done by state governments over the next six months in implementing the act into the working order of things before this development would reflect in the life of the common women and men.  Moreover, real estate developers also have to acclimatize to a number of policies and regulations once the act has been implemented in each state.

The main aim of this bill was to set up a regulatory body to guard consumers and promote the sector. According to the bill, the regulatory body will address disputes and improve the image of the industry, which was degrading in the past few years due to various reports on forgery by unknown developers. A Real Estate investor (may be a seller/buyer) has always been facing problems with the delays in the project launches, insufficient information, lack of transparency, fast track dispute resolution, fraud practices etc; but the features in the Real Estate (Regulation and Development) Bill has given utmost importance to resolving the problems faced by the Real Estate end – users and thus it will be helpful in making Real Estate transaction a smooth process in all aspects.

The major advantages for the buyer in lieu with the new bill are that the bill provides for mandatory registration of all projects with the Real Estate Regulatory Authority in each State. Real estate agents who intend to sell any plot, apartment or building should also register themselves with this authority. It 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. This is a win-win situation for a buyer as this will in turn make sure that the projects are delivered on time by the builders.

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 an onerous 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).The bill strongly works towards the correction within the sector  that were caused due to  absence of regulatory body.  Moreover, with the passing of the model Building Byelaws, government again has shown that they are in full swing to streamline the approvals.

The bill stipulates that the brokers need to register themselves with the State regulatory authority. This comes as a very big step by the government that will eventually lead to a transparency and professionalism in the real estate brokerage sector. Moving into an organized mode will make the real estate sector more lucrative. Progression in this sector totally depends on the broker’s skills and catering according to the needs of the customer. The brokerage profession with sufficient training is heading towards more organized zone. Training will play a crucial role for the industry to have NEW AGE BROKERS and eradicate Fly by Night brokers.

While all this seems brilliant and there is no doubt that the implementation of the act would lead to an amelioration in the way the real estate industry functions, there are a number of things that could be improved about the act, or things that should have to be monitored so as to prevent future mishaps. With all due respect to the act being a positive step towards the development of this industry, government authorities should be made accountable for timely approvals. Its implementation rules have to be made by the state governments within 6 months- by 31 October, 2016 as per the section 84 of the act. Developers are obligatory for a lot of policies and rules post the enactment of Real Estate Bill. Hurdles for Developers have increased to provide ease to buyers. From no pre-launches before approval to Builders to be liable for structural defects for five years as against two years, there are many such amendments that will become challenge for developers to work ahead whereas all these amendments in the act will bring smoothness in blocked process of buying a home for a buyer

These are the major changes and focus points of the Real Estate bill 2016 but still there are so many challenges which are to be tapped and covered by the future amendments namely; The bill is restricted to only purchase and sale of real estate projects and it misses out on the problems faced by builders when it comes to approval bottlenecks. The requirement to park 70 percent of collection in a separate escrow account is likely to be a big dampener for the already cash strapped builder. I believe that it’s a good move but the only hunch being that the burden should not fall on the end customers due to unnecessary price rise.  These are some of the shortcomings of the bill that can be worked on in future, with time as the bill would be implemented on a practical ground we would see the finer details and would understand what more needs to be worked which would ultimately lay grounds for the newer amendment. Lack of “single window” clearance of projects implies that the clearance of projects by the government would take long. More burden on developers might imply an increase in the price of real estate, thereby passing on the trouble to the buyers of property.

With all these benefits and lags in the bill, the year is still going to be vital in making a strong foundation for this sector to move ahead in the right direction and eventually emerge as a developed mature market based on trust, accountability and customer service. Overall, the act can be proclaimed to be a successful venture by the government of India and concerned authorities are awaiting its implementations in all corners of the nation.

Right time to buy? Let’s understand why!

There is a lot of hue and cry in the market about the slowdown in the real estate industry. A lot of research papers and studies by some renowned IPC’s are giving some crazy number with regards to the unsold inventory available in the market. We also keep hearing about various protests being held by some disenchanted buyers against the builders and developers who have delayed their projects for long and failed to meet commitments with respect to timelines, amenities and quality etc.

In such an environment, it is obvious for a buyer to get demotivated and they are forced to rethink about their buying plans. Buying real estate is the most crucial financial decision of anyone’s life and it is obvious to weigh all pros and cons before taking the plunge.  A lot of people postpone their buying decision waiting for that ‘Right time’.

I just wanted to address this puzzled situation by adding my two bit. There is very famous saying, ‘The Best time to buy Real Estate is today’. I don’t recommend you to follow this saying always, but as of today, you definitely should. Yes, I personally think there is no better time to buy Real estate than today. And I have my reasoning to back this statement and some of the reasons are as follows:

1.       Prices are on an all-time low:

This situation shouldn’t bother you at all if you are a long term investor and it should bring a big broad smile on your face if you wish to buy the property for self-use. As Indians, we tend to stay in a single property for around 15-20 odd years or even more. So it shouldn’t really concern you that your property wont appreciate for the next couple of years. In fact the only point, which you should be happy about and should look at is that are you getting it cheap from what it was or what it should have been if the market wasn’t down. Since you aren’t looking to sell the property in the next few years, the cheaper you get today is better for you. In long run, real estate prices never go down.

2.       Developers are offering attractive discounts and payment plans:

The developers and builders are in a very tight situation today. They have a severe liquidity crunch and they want to offload the unsold inventory that they have by all means possible. They have resorted to offering attractive discounts and payment plans to the clients so that there are more takers. All of this is an icing on the cake for a long term investor or someone looking to buy property for self-use. No developer would give these plans or offers if the market is hot and their product is selling like a hot cake. So it’s an advantage for all those people who are sitting on the fence and thinking of buying.

3.       RERA is being implemented:

RERA (Real Estate Regulatory Act) has been passed by both the houses in the parliament and will very soon be implemented across all the states. Once implemented, it would ensure that the developers put their act together and they deliver what they promised. The act would ensure greater transparency and would force the developers to adhere with timelines, ensure quality construction and provide all the promised amenities. The consumers would also have a body to register their complaints with if any of the above commitments isn’t met.

There are many other reasons apart from the ones mentioned above which should entice you to take the next step and buy the property that you have been looking at. So I would recommend you to start weighing the options, do your research, hire an expert consultant  and make that buying decision if you have been waiting for that right time. Needless to say that  you need to select the right product in the right market which matches your need perfectly. A good real estate consultant can help you take an informed decision so go and consult a professional today

EXCLUSIVE MANDATES

Concept of Exclusive Mandates increasing in India and how is this worthwhile

Selling your home is possibly the most imperative personal investment decision you are likely to make in your lifetime.  Therefore when negotiating its sale, you will consider it vital to conclude a successful transaction, measured in terms of the price achieved. Your preference of real estate agent and the method of marketing and selling your property are of paramount importance and will undoubtedly affect the financial success of the sale.

When it comes to deciding whether to opt for the Exclusive Mandate route or to go open listing route, the Exclusive mandate is in best interests for clients and is indisputably the wisest choice, as it helps to achieve the best possible price the market will pay. This is because Exclusive Mandate – permitting only one agent to accomplish the sale – affords the agent the opportunity to work with and for you, never against, without the pressure and inherent disadvantages of several other agents also looking to sell the property.

Whereas open listing creates competition between agents to sell the property as quickly as possible before anyone else, irrespective of the price, it is the Exclusive Mandate method that allows your agent to create competition between the buyers to buy your home, thereby in most instances pushing the price to the highest levels and the best possible price the market will pay.

The seller who wants to give an Exclusive Mandate but is fearful of not attracting enough buyers through one agent, can be rest assured that – provided the chosen agent puts in the time and effort to market the property and advertises regularly to give it the widest possible exposure – prospective buyers will go to the agents with the best houses – there is little buyer loyalty towards agents If you look at newspaper property supplements it is possible you will find the same property advertised by different agents, asking varying prices and giving a variety of reasons for the sale.  Even though this is without the seller’s permission, the damage has been done!

Not only can this cause confusion and uncertainty, it can also create an incorrect perception in the minds of buyers that the sale is urgent and desperate,  As a result, it more often than not attracts offers at nowhere near real market value.

It’s about commitment!  The agent asking you for the Exclusive Mandate is really promising and undertaking to give you 100% of their commitment to get you the best possible price that market will pay.  What they are really asking is for you to give them 100% of your commitment in return!

In India, with a low entry barrier that Real Estate has, we find anyone and everyone doing Real Estate directly or indirectly. Just to gain more business, many agents end up giving discounts to their customers and these discounts impact on the post sales services offered by these Agents. On the same hand, at RE/MAX we train our Associates on getting and promoting “Exclusive Listing and Mandates”. An exclusive mandate not only safeguards the associates time and interest in the listing but also helps in getting the best possible price in least possible time through dedicated advertising and marketing of the listing. Exclusive Mandates have worked beautifully for our Associates as well as customers. The customer does not have to go to any other Broker during that time frame and the Associate dedicates all his resources towards that particular listing.  For a Broker, It’s always good to have 10 exclusive mandates then to have 100 open listings. Indian real estate is moving towards being a mature market like the western countries. In countries like US, Canada, the client has to mandatorily go for the exclusive mandate route to get the deal done. Being a part of the Global brand RE/MAX, we have our own knowledge base and diverse experience. We preach and practice the same in Indian market as well. We have had small victories where our Associates have successfully got mandates and also shown better results.

Exclusive mandates are not a new concept even in the Indian market. International Property Consultants (IPCs) are already working on mandates in the commercial sector. RE/MAX has pioneered in the residential side of taking mandates from the sellers. We in fact have also been successful in taking buyer mandates as well. This is not very common in the Indian real estate market. To bind the buyer with the associate for a specified period of time and let single broker market is property is only possible when there is a lot of trust involved between the buyer and the agent and we as RE/MAX have been able to establish that client broker relationship based on Honesty, Integrity and Candor. By getting a Mandate from either client, we as RE/MAX make sure that the service provided to the client is no less and we do not hesitate to put in our time, money and effort in getting the best deal for the client.

A sigh of relief to the customers- Builders to park almost 70% of the amount collected by the buyers in the separate account which will be used only for the construction of the project

Real Estate in India was in major need of regulation of transactions between the buyers and sellers and there was a need to protect the interest of the customers. India is a nation which has a very high percentage of aspiring home buyers as owing a property is a matter of pride and a dream of everyone. At the same time, the customers of today who are majorly millennials want professionalism, transparency, accountability and efficiency in the home buying and selling process. The good news is that the Bill has laid a very solid foundation for building and implementation of what the consumers want. It was one of the most awaited revolution in the Real Estate market and is finally in action now. With a major agenda of the bill being the protection of the customer’s interest, it will ensure accountability in our sector. It’s a very encouraging move by the government which will positively impact our sector and will bring a peace of mind to the customers whose lifetime savings are at stake. 

We feel that one of the major highlight of the Bill is the parking of 70% of the amount collected by the buyers in the separate account which will be used only for the construction of the project. We have always had issues with the delays in the delivery of the projects. With this 70% of the initial amount going into various costs like the construction of the project, land cost etc, it is assured that the funds of the customer are not diverted to other projects.  The government is trying to ensure that the developers do not fall short of funds and therefore, can work effectively towards timely delivery of the projects to customers. It is ultimately paving the way towards matching the demand and the supply gap in the sector along with bringing back the lost confidence of the customer in real estate. With the registration, timely completion and complete handover of the project becoming mandatory, the buyers will see the project development happening not only papers but in real. The best part is that the bill has positives for buyers, developers as well as brokers and it will collaboratively make it more effective and long-term.

Home sales have slowed down and one of the biggest reasons for that is the delay in the construction of the projects. There were many other provisions in the bill which created a huge buzz all over. Earlier when there was no regulation in the sector, there were no ways to track where the realtor is using the funds collected from their respective clients. With so much to deliver and no authority to look forward to, the developers were always in the news for making the use of money from one project for the completion of some other project. With the mandatory registration and timelines coming in place along with penalties being charged for any delay; everything in real estate will come in place.

India is a very vast country and the cost of project varies from city to city. With the provision that the state government can alter this amount to less than 70% if the need be, is another positive that the Bill brings with itself.  All the realtors will have to maintain their books of accounts and facilitate the possession of all documents that the buyer is entitled to and there can be no false claims regarding any hidden cost/services as everything will have to declared by the developer initially. All these positive sides of the revived version of Real Estate Bill will bring realty sector back on track. Our other major concern is the Single Window Clearance of the projects which is another major factor for the project delays. I am sure that with all the issues being addressed, in future there will be some provision for this as well. 

Myths About Real Estate

There is a lot of misleading and incorrect information that we read and hear about Real Estate as a lot of Real Estate myths are often passed around among the buyers and sellers. Researching of all the information before you make your final decision is very important as it will be helpful in creating your own opinion as it will help you in separating the facts from the fiction. We hear so many good and bad real estate experiences from our friends and relatives that sometimes we start feeling that we know how it works. But in realty, Real Estate is much more than what we read about and we would like to use this platform to burst some real estate MYTHS and the truths behind each of them.

Myth 1 – Real Estate is a high risk investment

Truth: Any investment that may be real estate, shares, mutual funds, gold etc has its own set of risks and rewards. As an investor, before making any investment decision as big as Real Estate, you should we well aware of all the risks and take your decision wisely. In real estate, the best part is that your realtor is there at every step to guide you and thus take calculated risks. As a matter of fact, real estate is an investment that has the capacity of multiplying your profits. A number of factors contribute towards it like the location, property type, government policies, market condition etc. An expert advice is all you need to make this calculative risk. 

Myth 2 – Only metros are the best places to invest in real estate.

Real Estate investment mantra is that you should invest in areas where there is a continuous scope of development in the near future. A smart investor always analyses the market trends, scope and pace of the market development and then identifies the areas that will be the next big thing. Many of the metros and Tier 1 cities have reached a saturation level and there is a very little scope for the market drives to find a place in such already developed areas. In India, a lot of Tier 2 cities are emerging as the future real estate markets. The fact is that when one places reached its peak on all the development counts, the new unexplored markets come into limelight. The emerging localities have an affordable investment bracket at initial time of its development, but they surely see appreciation when the development completes. Also, the fact that the cities shortlisted in the first phase of smart city project, itself is a proof of the high growth potential in Tier 2 cities like Indore, Surat, Kochi etc.  

Myth 3 – Most of the Indian developers are losing focus on the MIG sector and only concentrating on high-end residential projects because it makes better business sense.

Fact: The high end residential projects are in surely in demand as a result of various factors like increasing income levels of individuals, NRI investments in the country etc, but with the focus of the Indian government towards “Housing for All” and “Affordable Housing”; the developers have full focus on this segment as well. In fact, the construction of mid-income housing projects fetches them more demand in terms of units and thus they see a lot of sense in developing them.

Myth 4 – Real Estate market is bad, we must keep away

Fact: At times when the Real Estate market is bad, the best opportunity is that you can enter the market at a very low price and then maximize your returns when the market gets better. When the market is slow, the buyers can make use of lucrative payment plans and policies that the builders offer. But at the same time you have to be very cautious in choosing your developer. Only the developers who have a good past record and credible name in the market should be opted. A real estate professional can be your mentor in such situations.

Myth 5 – Real estate is not for the educated class like us.

Fact: There was a time when Indian real estate was very unorganized and unprofessional, when every third person was a realtor. With the changing time, real estate is moving towards a direction where proper rules and regulations are being introduced in the market. With this the unorganized players are getting vanished from the market and a state has reached where we have polished and educated professionals joining the sector at various levels. All the global players already have their associates certified and trained to be able to move from just being a keeper of the listing to Real Estate Consultants who are able to mentor their customers in their buying/selling decisions.

We all need to understand that every market is unique and real estate market is a magnet for discussion. Everyone loves sharing about their experience about it as it is one of the biggest investments of everyone’s life. Our suggestion to you will be to take an expert consultation before reaching to your final decision. Real Estate now has professionals from different industries joining in to help you understand the myths and facts of this sector.   

New Age Broker

The real estate brokers are the cornerstone of the real estate industry in India. They are the front end of the business, the first point of contact for the customer. It is they who hold the pulse of the market. Their importance notwithstanding, the general perception of the real estate broker is one of mistrust. “He is the last guy you can trust,” used to be the common refrain. That was probably true in the 80’s. Times have changed and indeed for the better. Today, the real estate broker has undergone a transformation.

CHANGING GAME

This transformation in the real estate brokerage scene in India has been driven by many factors. First, the opening up of the economy and influx of international companies into India has brought about a major demand turnaround in real estate services. That has in turn translated into demand for real estate brokerage services that have best practices benchmarked with the best in global standards.

Second, the growth of information technology has brought about a revolution in the way business is conducted. Internal business processes could be completely automated to

suit ease of working.

Third, the volumes of transactions and consumer preference and choice demanded that systems be developed so that the customer can search, view and select from the comfort of his home. Inputs for decision making had to be made more comprehensive and at the same time, simple.

Fourth, the relaxations and incentives for investments by the NRI's have to the emergence of a new demand where it was not practically possible for international clients to physically travel and see the properties before making the decision to purchase. This was where IT-enabled solutions came to their rescue.  One additional factor has been that there were quite a few international property consultants who made inroads into the highly disorganized brokerage industry in the country and started providing high quality services, backed by mandates. This made the local broker look up and start to address the growing competition from corporate brokers.

All these factors have led to domestic brokers waking up to the need to get their act together, if they wanted to remain in business.  They started out on a series of measures. Some were simple, such as sprucing up their offices. Websites started mushrooming. Listing properties on the internet became a common practice. They increasingly started resorting to e-marketing. Brokers started streamlining their internal processes.They have next paid attention to the softer side of the game. The attire and the technique of communication started changing. Brokers started attending classes and signed up for a range of courses from personality development to principles and practice of global real estate business. Increasingly, the brokerage industry has witnessed the entry of highly qualified professionals. From the image of the broker we encountered at the beginning of this article, the broker today may well be an engineer, MBA, advocate, retired personnel, chartered accountants among others. Well-educated women too, are choosing this as a career option. These factors are slowly, but surely transforming the real estate brokerage industry. The makeover is for real. The new-age broker has arrived. Most corporate clients can avail the services of international property consultants for whom clients are not really a problem as they came from international referrals. Individual customers, however, had no option but the local untrained broker to deal with. This demand for quality is now being filled by the new-age local brokers, who are home-grown, but equipped and skilled to provide the best in quality standards and customer satisfaction.

The new age broker is there for the discerning customer; he is there to hand-hold, guide, advise and take the customer through the entire process of making a property purchase decision in a transparent, thorough and clean manner. The customer does not really mind paying a fee for good quality service and assurance. The property transaction experience thus becomes an enjoyable one.