The Real Estate (Regulation and Development) Act (RERA) is being touted as the ultimate saviour for buyers, but most stakeholders still have doubts over the draft rules for the RERA circulated by the government.
According to Pankaj Kapoor, Founder and Managing Director of Liases Foras Real Estate Ratings and Research Pvt Ltd, the punitive measures (in RERA draft rules) have been eased out and there is no clarity on the extent of disclosure of the status of under-construction flats by developers. "Will the developer register with the latest sanctions or should the previous changes be accounted for? Will the consent of two-third of buyers for change in layout be applicable on existing projects? Will an already delayed project fall under the ambit of RERA? These are some of the pressing questions that still need to be answered. We hope the final draft addresses this ambiguity and the interest of buyers are safeguarded with retrospective effect," he said.
As per Mr Kapoor, the bone of contention this time is the nature of plan submitted by the builders. He said, "A particular group fighting for this pointed out that the draft rules lacked clarity as to which plan the builders of existing projects need to submit while registering with the regulator - the original, sanctioned plan or the latest version. We believe it is in the best interest of the buyers if the builders submit the original plans because the latest plan may have been revised many times. In addition, there is ambiguity over the schedule of completion of projects. There are penal clauses in RERA but in the absence of specific rules, the authorities will not be able to bring errant promoters to task."
In a report, the non-brokerage research centric firm, also highlighted execution delays, unfair pricing and recent judgements from consumer forums against developers. It said, "It is indeed intriguing to see that the National Consumer Disputes Redressal Commission (NCDRC) is dealing with errant developers with an iron hand. In the past, it brought Unitech and Lodha to task and now it is Jaypee Group, who is facing the music. While the Supreme Court has stayed the penalty order, two other rulings are still under review. However, it is sad that even with RERA looming on the one hand, and the consumer court rulings on the other, delays remain a bitter truth in the Indian realty sector. If the apex court does not retain the rulings of NCDRC, it may not give any further orders to defaulting developers in future. It is no secret that the sector cannot attain efficiency if execution delays and unfair pricing tactics are not sorted out right away."
"When we talk of affordability, we only talk about pricing in general," Mr Kapoor said, adding, "There, however, are many external factors beyond the control of a developer or buyer which affect affordability. One such factor is stamp duty and property taxes. While cities like Gurgaon saw a reduction in stamp duty a few months back, there are others like Nagpur, which await increased stamp duty and property taxes. While we are doing everything possible to boost affordable housing, state governments must do a thorough reality check to assess whether such increased levies are feasible at this juncture. If at all any increase in taxes and duties is unavoidable, the quantum of hike must be checked. The market is very price sensitive any such move may prove to be detrimental in the long run."
The report also highlighted the issue of vacant houses. The government declared that over two lakh houses, constructed under Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and Rajiv Awas Yojana (RAY), are still lying vacant. The highest number of vacant houses is in Maharashtra with 41,449 units, followed by Delhi (26,199), Gujarat (24,769), Andhra Pradesh (20,639), Telangana (17,982) and Uttar Pradesh (16,050). "This is one of the biggest anomalies of the real estate sector, where millions are homeless and slums are proliferating, while over a lakh units lie unoccupied. This is clearly indicative of a missing dimension in the cycle that needs to be addressed," the report from Liases Foras said.
However, there is also some news that added cheer to the market. Market regulator Securities and Exchange Board of India (SEBI) issued a consultation paper making various proposals to make real estate investment trusts (REITs) attractive. These include relaxation in pricing and valuation norms, minimum number of investors and increased investment in under-construction properties. "So far REITS have garnered tepid response from Indian players despite relaxations and flexibilities announced from time to time. It remains to be seen as to whether the current set of relaxations actually lures participants to REITS,' Liases Foras added.