–
JONES LANG LASALLE
RERA 1|Page
REAL ESTATE REGULATIONS ACT IMPLICATIONS ON VARIOUS
STAKEHOLDERS & WAY OUT
K J Somaiya Institute of Management Studies and Research Somaiya Vidyavihar campus, Vidyavihar (E), Mumbai – 400077
SUMMER INTERNSHIP PROJECT REPORT Submitted in partial fulfilment of the requirements for the award of degree of
Post Graduate Diploma in Management
Submitted By
SHIKHAR SODHANI Roll 053 PGDM Core - Batch 2016-18
Under the guidance of
Mr Nishant Kabra Local Director (Land Services), JLL Property Consultants (India) Pvt. Ltd.
&
Prof. Ramkishen Y Department of Post Graduate Diploma in Management, SIMSR, Mumbai-77
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DECLARATION
I, Shikhar Sodhani, student of Post Graduate Diploma in Management at K J Somaiya Institute of Management and Research, hereby declare that this project report entitled “RERA and its implications on various stakeholders� with JLL Property Consultants (India) Pvt Ltd. is the record of authentic work undertaken by me during the period from 2nd May 2017 to 30th June 2017 and have not been submitted to any other University or Institute for the award of any degree / diploma etc.
________________ (Shikhar Sodhani) Date:
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CERTIFICATE FROM SUMMER PROJECT GUIDES THIS IS TO CERTIFY THAT SHIKHAR, A STUDENT OF THE POST GRADUATE DIPLOMA IN MANAGEMENT (AT KJ SOMAIYA INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH) HAS WORKED UNDER OUR GUIDANCE AND SUPERVISION. THIS SUMMER PROJECT REPORT TITLE “RERA AND ITS IMPLICATIONS ON VARIOUS STAKEHOLDERS” HAS THE REQUISITE STANDANRD AND TO THE BEST OF OUR KNOWLEDGE HAS NO PART OF IT BEEN REPRODUCED FROM ANY OTHER SUMMER PROJECT, MONOGRAPH, REPORT OR BOOK.
FACULTY GUIDE
CORPORATE GUIDE
Prof. Ramkishen Y
Mr Nishant Kabra
Asst. Professor
Chief Sales Officer, Flock
KJ SIMSR
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JLL Property Consultants (India) Pvt Ltd.
ACKNOWLEDGMENT
First and foremost, I would like to thank my project guide, Mr. Nishant Kabra (Local Director, JLL) for his guidance and facilitation along each and every step of the project. This endeavour would not have been fruitful if not for his constant encouragement and inputs. Over and above the project, I have been fortunate to learn many aspects of work ethics from him for which I am grateful. I would also like to thank Mr. Nishant Kumar (Manager, JLL) for his vital inputs which shaped the direction of this project. I would be grateful to the entire JLL Mumbai team for making me understand the commercial and technical aspects of Real Estate ecosystem which were required for this project. Lastly, I would like to place my gratitude to my faculty guide at SIMSR, Prof. Ramkishen Y for his guidance.
SHIKHAR
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TITLE
PAGE NO (FROM – TO)
EXECUTIVE SUMMARY
7
ABOUT THE COMPANY
8
SERVICES OFFERED
9
EXTERNAL ENVIRONMENT
9
COMPETITIVE ENVIRONMENT
9
INTRODUCTION TO THE SECTOR
11
MARKET SIZE
12
INVESTMENT
12
INDIAN GDP FROM CONSTRUCTION
13
EMPLOYMENT STATISTICS
13
PORTER’S 5 FORCE ANALYSIS
14
CHALLANGES
15
WHY RERA
16
ABOUT RERA
18
APPLICATION & PROCESS FLOW
20
MAJOR STAKEHOLDERS & EXCLUSIONS
20
REAL ESTATE PROJECT DVELOPMENT PROCESS
23
IMPACT ON DEVELOPER
24
IMPACT ON FINANCIAL INSTITUTIONS
28
IMPACT ON REAL ESTATE AGENTS
30
IMPACT ON BUYERS
33
GREY AREAS & WAY FORWARD
36
OVERALL SENTIMENT MAPPING & CONCLUSION ANNEXURE 1
39
REFERENCES
44
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40
Executive summary: Real estate has been one of the key contributors to Indian GDP and is expected to be 25% of GDP in near future. Indian real estate has attracted $32 billion in private equity so far. The global capital flow into Indian real estate in 2016 stood at $5.7 billion. In India, Real Estate sector is the second largest employer post agriculture and is slated to grow at 30% over next decade. India's urban population is forecast to increase about 40% to over 580 million (58 crore) by 2030 from 420 million (42 crore) in 2015 which means, nearly 110 million (11 crore) houses would be required by 2022 in urban as well as rural India to provide housing to all citizens. Considering the immense potential in the sector and significant contribution in the country’s economy still the sector is highly unorganized and non-regulated. Real Estate sector has many issues prevalent affecting various stakeholders like developer, promoters, land-owners, financial institutions, real estate agents and buyers. There had been various rules and regulations previously at state level but there was no dedicated authority for keeping a check on these players adhering to the stated guidelines as a result of which this sector has been considered and highly risky in terms of investment till the project is not taken up by the organized players. At times, even the projects by these renowned and organized players have seen bad consequences which have resulted in loss of confidence of both buyer and investor in this sector. To overcome the issues in this sector like delayed possession transfer, diversion of funds, pre-sales without prior approvals, missing accountability, lack of monitoring and regulation of the sector etc., Real Estate (Regulations & Development) Act has been put into force by Central government which is in effect from 01st May 2017. Since the act will come into force from 01st August2017, presently a 3-month grace period is provided to all the promoters, developers to register their projects and real estate agents to register under RERA. This report is an attempt to understand the impact of RERA on various stakeholders. The methodology used for research is Delphi technique. Meetings and interviews were conducted with various developers, lawyers, financial institution heads and consumer forum representatives to understand their perception about how RERA will impact them and the whole real estate ecosystem. Further a sentiment mapping was done on a scale of positive, negative and neutral for each stakeholder based on qualitative research. Finally, this report mentions some grey areas which still need clarifications and suggestions on the way forward and with overall sentiment mapping of Real Estate sector for RERA.
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About the Company: JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0 billion, JLL has more than 280 corporate offices, operates in more than 80 countries and has a global workforce of more than 70,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment Management, has $59.7 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. JLL has over 50 years of experience in Asia Pacific, with over 33,000 employees operating in 92 offices in 16 countries across the region. The firm won 15 awards at the International Property Awards Asia Pacific in 2016 and was named number one real estate advisor in Asia at the 2015 Euromoney Real Estate Awards. JLL is India’s premier and largest professional services firm specializing in real estate. With an extensive geographic footprint across 11 cities (Ahmedabad, Delhi, Mumbai, Bangalore, Pune, Chennai, Hyderabad, Kolkata, Kochi, Chandigarh and Coimbatore) and a staff strength of over 8500, the firm provides investors, developers, local corporates and multinational companies with a comprehensive range of services including research, analytics, consultancy, transactions, project and
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development services, integrated facility management, property and asset management, sustainability, industrial, capital markets, residential, hotels, health care, senior living, education and retail advisory. The firm was awarded the Property Consultant of the Decade at the 10th CNBC-Awaaz Real Estate Awards 2015 and the Best Property Consultancy in India at the International Property Awards Asia Pacific 2016-17.
Services Offered: Corporates • • • • • • • • • •
Investors and Developers
Capital Markets Strategic Consulting Corporate Finance Corporate Solutions Facilities Management Global Benchmarking Services Lease Administration Project and Development Services Tenant Representation Transaction Management
• • • • • •
Agency Leasing Capital Markets Land Services Project and Development Services Property and Asset Management Strategic Consulting
Industries • Hotels and Hospitality • Industrial and Logistics Property Types • • • • •
Agency Leasing Hotels and Hospitality Industrial and Logistics Residential Retail
External Environment For JLL being a Real Estate Company the following will be the factors affecting it operations • •
JLL has done new acquisitions and its global reach strengthens its superior performance Few factors not under the control of the company and affect the real estate market include ▪ Macro movements of the stock, bond, currency, and derivatives markets ▪ The political environment ▪ Government policy and regulations, in each case whether at local, national or international levels ▪ Interest rates and the availability of real estate debt financing for our clients ▪ The cost and availability of natural and non-renewable resources used to operate real estate ▪ Emerging technologies that are potentially disruptive
Competitive Environment • • • • • • • • • •
Focus on client relationship management as a means to provide superior client service on an increasingly coordinated basis Integrated global platform, including a highly diverse set of service offerings Ability to deliver innovative solutions and technology applications to assist clients in maximizing the value of their real estate portfolios Ability to organize and analyse the significant data about real estate that collect in the course of the business The quality and worldwide reach of their industry-leading research function, enhanced by applications of technology and their ability to synthesize complex information into practical advice for clients Reputation for consistent and trustworthy service delivery worldwide, as the result of creation of best practices and by the skills, experience, collaborative nature, and integrity of their people Local market knowledge Brand Strength and reputation Financial Strength High staff engagement levels
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• • • • •
Efforts to deliver the best possible returns for investment management clients The quality of internal governance and enterprise risk management History of delivering strong investment performance for clients The management of supply chain for the benefit of the project management, property and facility management, and other services we provide to clients Sustainability leadership agenda, which addresses the long-term financial, environmental, and social risks and opportunities for them and their clients.
Title of the project: RERA and its Implications on Various Stakeholders in Real Estate Industry
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Introduction to the sector: The Indian Real Estate & Construction sector is one of the most globally recognized sectors. In the country, it is the second largest employer after agriculture and is slated to grow at 30% over the next decade. The growth of this sector is complemented by the growth of corporate environment and the demand for office space as well as urban and semi-urban accommodations. The construction industry ranks third among 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy. It is also expected that this sector will incur more Non-Resident Indian (NRI) investments in the near future, as a survey by industry body has revealed as a 35% surge in the number of enquires with property dealers. Bengaluru is expected to be the most favoured property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun. Private Equity (PE) funding has picked up in the last one due to attractive valuations. Furthermore, with Government of India introducing newer policies helpful to real estate, this sector has garnered sufficient growth in recent times.
Residential Space
•
Residential segment contributes approximately 80% of the real estate sector
Residential Space Commercial Space
Real Estate Sector
Retail Space
Hospitality Space
SEZs
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• • • • • • •
Few players with presence across India Over 40.2 million sq. ft. of corporate real estate space was absorbed in by top seven cities of the country during 2015 Few players with presence across India eal estate sector FDI in multi brand retail to boost demand Fragmented market with few national players Of a total planned supply of 67 million sq ft across major cities, around 38 million sq ft would come up during 2013 -15
•
As of 30 July 2015, the country had 972 approved hotels with 63715 rooms
•
As of FY 16,the government has formally approved 415 SEZs, of which 205 are in operation Majority of the SEZs are in the IT/ ITeS sector Real estate projects within the Special Economic Zone (SEZ) are also permitted 100 per cent FDI
• •
Market Size: The Indian real estate market is expected to touch US$ 180 billion by 2020. The housing sector alone contributes 5-6 per cent to the country's Gross Domestic Product (GDP). In the period FY2008-2020, the market size of this sector is expected to increase at a Compound Annual Growth Rate (CAGR) of 11.2 per cent. Retail, hospitality and commercial real estate are also growing significantly, providing the much-needed infrastructure for India's growing needs. The private equity investments in real estate increased 26 per cent to a nine-year high of nearly Rs 40,000 crore (US$ 6.01 billion) in 2016.
Sectors such as IT and ITeS, retail, consulting and ecommerce have registered high demand for office
Growth in Tourism
Epidemological Changes
Policy Support
Growth Drivers Easier Financing
Urbanisation
Growing Economy
space in recent times. The office space absorption in 2016 across the top eight cities amounted to 34 million square feet (msf) with Bengaluru recording the highest net absorption during the year. Information Technology and Business Process Management sector led the total leasing table with 52 per cent of total space uptake in 2016. Mumbai is the best city in India for commercial real estate investment, with returns of 12-19 per cent likely in the next five years, followed by Bengaluru and Delhi-National Capital Region (NCR).
Investments: FDI in Real Estate on an upward trend •
•
Total FDI in the construction sector, from April 2000-March 2016 stood at US$ 24.188 billion. During April 2000-March 2016, total cumulative inflows in the construction development sector accounted for 8.4 per cent of total inflows into the country.
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Indian GDP from construction: GDP From Construction in India decreased to 2197.52 INR Billion in the first quarter of 2017 from 2278.05 INR Billion in the fourth quarter of 2016. GDP From Construction in India averaged 2073.94 INR Billion from 2011 until 2017, reaching an all-time high of 2293.21 INR Billion in the second quarter of 2016 and a record low of 1855.78 INR Billion in the third quarter of 2012.
Employment statistics: India is estimated to need around 76.5 million workers in the building, construction and real estate sector by 2022, with affordable housing, which is expected to need 38 million workforces by 2030 from 29 million at present, predicted to be the key job creator. KPMG India along with the National Real Estate Development Council (NAREDCO) released a report highlighting that India's urban "There is a huge need that population is forecast to increase about 40% to over 580 million (58 the industry has to cater to. crore) by 2030 from 420 million (42 crore) in 2015. We need manpower, According to the report, nearly 110 million (11 crore) houses would proficient with excellent be required by 2022 in urban as well as rural India to provide housing skills on technical abilities. to all citizens. This includes the current shortage of over 60 million (6 crore) houses, out of which around 20 million (2 crore) exist in urban The industry and the areas. government need to pay a Presently, only a meagre 9.8 million construction workers of the total special focus on this segment 32 million are registered in the country. of workforce," In terms of employment, technicians/foremen have had the maximum -Dilip Chenoy growth of 95% between 2005 and 2011 followed by unskilled MD & CEO (NSDC) workforce (34%). Im
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Porter’s 5 Force analysis of industry:
Threat of New Entrants (Medium)
Bargaining Power of Customers (Medium)
Competitive Rivalry (High)
Substitute Products (Low)
Bargaining power of Suppliers (Medium)
Competitive Rivalry
Threat of New Entrants
•Strong Rivalry due to large no. of players operating in India •Limits a seller's ability to set the prices for goods and services •An absence of competitive neutrality due to unequal provisioning of policy concessions
•Uncertain investment timeline due to long gestation period •High Cost of Land & Land use restrictions act as a natural barrier •Brand value of the incumbent player for the consumers
Substitute products
•No specific substitutes available •Substitutes are mainly government - provided housing, mostly limited to the economically backward class
Bargaining Power of Suppliers
•Large Real estate firms have good bargaining power against customers •Unregulated & badly managed land banks ake land acquisition difficult for reality companies
Bargaining Power of Customers
•Due to large variety of quality players, the customers have many options to choose from •They are also becoming more discerning & demanding better quality
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Challenges: The key challenges that the Indian Real Estate Industry is facing today are: • • • • • • • •
Lack of clear Land titles Absence of title insurance Absence of industry status Lack of adequate source of financing Shortage of labour Rise in manpower and material cost Approvals and procedural difficulties Lack of regulations and monitoring
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Why RERA? Real Estate sector has been thought of highly unorganized and non- professional as per the picture portrayed by media and consumer bodies. Although this sector comprises of unorganised players still there are developers & Promoters in the industry who have maintained and kept their brand a renowned name in the industry. This bunch of developers (many of which are listed players), have always kept transparency and consumer benefit at their key focus in all their projects. But, since this sector is highly unorganized and was not actually regulated, many players (inclusive of many reputed names too) entered in the sector and became a reason for bringing bad name to the same. Key issues faced by the buyer due to these players – • • • • • • • • •
Delayed possession Change in the design from the sanctioned plans Payment of high interests by buyer at default Difference in the interest rates between buyer and developer default Maintenance issues Not providing conveyance deed to the societies in time Diversion of funds putting the projects on hold Fly by night operators No prior approvals & Disputed land titles
The above stated reasons have brought a bad name to the sector resulting in investors’ & buyers losing confidence, high unsold inventories and suffering to the buyers and investors who have their funds blocked in these projects Here one should understand that such practices have never been a part of the projects by organised players. These reputed players have always had intention of consumer satisfaction which has been the reason the buyers have instilled confidence in their projects. As always portrayed it’s not only the developers who has been the reason for delayed project timelines but to state an example quoted by a senior level executive at Oberoi Realty, “We have to take more than 150 permissions for a project before we can start construction”. So, in such situations only developer cannot be blamed for delayed delivery and project timelines
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Portraying the point of view of financial institutions, they feel that many a times due to government approvals, issues on the site, unorganized players many of their deals did not turn profit making. This has been a reason that these financial institutions fund projects of reputed developers majorly. For the above stated issues / pain points faced by various stakeholders RERA came as one stop solution. RERA majorly focuses on: • • • • • • •
Transparency by registration and display on RERA website Advertising /Marketing and selling of the project post all approvals in place Speedy redressal of complaints Formation of separate account for the amount realised by the buyers Restriction of putting in 70% of the amount in the account which can be only withdrawn for construction purposes Defined project timelines and handover failing which heavy penalties will be levied Registration of real estate agents by the promoter under the project
RERA impacts the processes of various stakeholders and making it more consumer focused and transparent ensuring the timely project completion and thus building confidence in the consumer section.
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RERA Act (Real Estate Regulation and Development): The Real Estate (Regulation and Development) Act, 2016 (Act) was enacted on 25 March 2016. A total of 59 sections were notified by the Central Government on 27 April 2016, which came into force on 1 May 2016. The remainder sections of the Act were notified on 19 April 2017 and finally came into force from 1 May 2017. Additionally, the Government of Maharashtra has notified and published the Maharashtra Real Estate (Regulation and Development) (Registration of real estate projects, Registration of real estate agents, rates of interest and disclosures on website) Rules, 2017 and the Maharashtra Real Estate (Regulation and Development) (Recovery of Interest, Penalty, Compensation, Fine payable, Forms of Complaints and Appeal, etc.) Rules, 2017 under Section 84 of the Act on 20 April 2017 (Rules). The Act and Rules are only applicable to new and ongoing residential and commercial projects. Ongoing projects are those projects which have not received an occupation certificate or a completion certificate on the date of commencement of the entire Act (i.e. on 1 May 2017) (Date of Commencement). The Act prescribes the establishment of a Real Estate Regulatory Authority (Regulatory Authority) and Real Estate Appellate Authority (Appellate Authority) for a fast track adjudication of consumer grievances. The key objectives of the RERA are: • Ensuring Transparency & Efficiency in real estate sector in regards to sale of plot, apartment, building or real estate project. • Protecting the interest of consumers in real estate sector • Establishing adjudicating mechanism for speedy dispute redressal • Establishing Appellate Tribunal to hear appeals from the decisions, directions or orders of the Real Estate Regulatory Authority Real Estate sector in India is one of the biggest wealth creators for investors. However, this sector is highly unregulated. To overcome this issue and to ensure 9that this sector grows along with building confidence in the stakeholders, the incumbent government brought RERA into picture.
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State
Notification Status
Arunachal Pradesh
In Progress
Assam
In Progress
Chhattisgarh
In Progress
Himachal Pradesh
In Progress
Jharkhand
In Progress
Manipur
In Progress
Meghalaya
In Progress
Mizoram
In Progress
Nagaland
In Progress
Sikkim
In Progress
Telangana
In Progress
Tripura
In Progress
Andhra Pradesh
Notified
Bihar
Notified
Gujarat
Notified
Kerala
Notified
Madhya Pradesh
Notified
Maharashtra
Notified
Odisha
Notified
Rajasthan
Notified
Uttar Pradesh
Notified
Goa
Rules Drafted (Not yet notified)
Haryana
Rules Drafted (Not yet notified)
Karnataka
Rules Drafted (Not yet notified)
Punjab
Rules Drafted (Not yet notified)
Tamil Nadu
Rules Drafted (Not yet notified)
Uttarakhand
Rules Drafted (Not yet notified)
West Bengal
Rules Drafted (Not yet notified)
Union Territories
Notification Status
Andaman and Nicobar Islands
Notified
Chandigarh
Notified
Dadra and Nagar Haveli
Notified
Daman and Diu
Notified
Delhi (National Capital Territory of Delhi) Notified Lakshadweep
Notified
Puducherry
Notified
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Application of RERA: RERA covers all the new projects commencing on or after 01 st May 2017, also it covers all the ongoing projects which have not received Completion Certificate from Competent authority. This act is applicable to sale of apartments, buildings or plots in commercial and residential projects. However, it doesn’t include the renting/ leasing of apartment, building or plot.
Process flow of RERA: Register on website for MahaRERA
Furnish the required detials
Approval of the documents from Authority
If approved, RERA No. generated
Who has to register under RERA: • • • • •
All commercial real estate projects where land is over 500 m2 All residential real estate projects where land is over 500 m 2 or eight apartments All ongoing projects which have not received completion certificate on the date of commencement of act, will have to register within 3 months (from date 01st May 2017) Developers/ Promoters who facilitate/ execute these projects as defined above Real Estate Agents who facilitate the selling or purchasing of properties in these projects
Major Stakeholders in Real Estate Industry: • • • •
Developers/Promoters & Land Owners Financial Institutions Real Estate Agents Buyers
RERA Excludes: •
•
•
All the commercial & Residential projects where land is less than 500 m2, for residential projects the number of apartments to should be less than or equal to 8 All the projects where promoter has received Completion Certificate prior to the commencement of act from competent authority Projects for the purpose of repair, renovation or re-development that doesn’t involve marketing, advertising, selling or new allotment of any apartment, plot or building from the project.
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Need for Registering the project The project needs to be registered with Authority, as without project registration, no promoter shall advertise, market, sell or offer for sale or invite persons to purchase any plot, apartment or building in a real estate project.
Documents required for registration For Project, promoter needs to furnish (Central Act) – • •
•
• •
• •
A brief detail about the enterprise (name, registered address, type and particulars of registration), and the particulars of registration, and the names and photographs of the promoter A brief detail of the projects launched by him, in the past five years (along with status – completed/being developed), including the current status of the said projects, any delay in its completion, details of cases pending, details of type of land and payments pending an authenticated copy of the approvals and commencement certificate from the competent authority obtained in accordance with the laws as may be applicable for the real estate project mentioned in the application, and where the project is proposed to be developed in phases, an authenticated copy of the approvals and commencement certificate from the competent authority for each of such phases the sanctioned plan, layout plan and specifications of the proposed project or the phase thereof, and the whole project as sanctioned by the competent authority the plan of development works to be executed in the proposed project and the proposed facilities to be provided thereof including firefighting facilities, drinking water facilities, emergency evacuation services, use of renewable energy • the location details of the project, with clear demarcation of land dedicated for the project along with its boundaries including the latitude and longitude of the end points of the project Proforma of the allotment letter, agreement for sale, and the conveyance deed proposed to be signed with the allottees The number, type and the carpet area of apartments for sale in the project along with the area of the exclusive balcony or verandah areas and the exclusive open terrace areas apartment with the apartment, if any The number and areas of garage for sale in the project The names and addresses of his real estate agents, if any, for the proposed project The names and addresses of the contractors, architect, structural engineer, if any and other persons concerned with the development of the proposed project
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•
• • •
Declaration, supported by an affidavit, which shall be signed by the promoter or any person authorised by the promoter, stating: 1. That he has a legal title to the land on which the development is proposed along with legally valid documents with authentication of such title, if such land is owned by another person 2. That the land is free from all encumbrances, or as the case may be details of the encumbrances on such land including any rights, title, interest or name of any party in or over such land along with details 3. The time period within which he undertakes to complete the project or phase thereof, as the case may be 4. That 70% of the amounts realised for the real estate project from the allottees, from time to time, shall be deposited in a separate account to be maintained in a scheduled bank to cover the cost of construction and the land cost and shall be used only for that purpose: Provided that the promoter shall withdraw the amounts from the separate account, to cover the cost of the project, in proportion to the percentage of completion of the project: Provided further that the amounts from the separate account shall be withdrawn by the promoter after it is certified by an engineer, an architect and a chartered accountant in practice that the withdrawal is in proportion to the percentage of completion of the project: Provided also that the promoter shall get his accounts audited within six months after the end of every financial year by a chartered accountant in practice, and shall produce a statement of accounts duly certified and signed by such chartered accountant and it shall be verified during the audit that the amounts collected for a particular project have been utilised for the project and the withdrawal has been in compliance with the proportion to the percentage of completion of the project. That he shall take all the pending approvals on time, from the competent authorities; That he has furnished such other documents as may be prescribed by the rules or regulations made under this Act Such other information and documents as may be prescribed.
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Real Estate project development process Various Level of funding Financial Institutions
Design & Statutory approval from various departments
Land Acquisition
Occupancy Certificate
Marketing and Sales
Construction
and Handover Possession
The Promotor’s processes which are impacted by the Real regulation rules is depicted as follows:
Business Development
• • • • • •
Target Markets/ Asset Class Pre-Feasibility Study Land lease/ buy / JDA Financial Closure FSI Determination Sanction Plans/ Layout Approvals
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Design and Product service
• • • •
Product Innovation & offerings Design Management Communicati on Management Pricing and Schemes
Finance and Budget planning
• • • • •
Baseline schedule and budget Impact Analysis of Revisions Monitoring of Budget and Schedules Project cash flow planning Project details and MIS and review
Supply Chain Management
• • • • • •
Requisition Contracts Management Procurement Management Inventory Management Bill certification and payment Equipment Management
Sales Management
• • • • • • • •
Price approval and masters Advertising Broker Management Sales & Customer agreements Collections Registration Formation of Society Handover
Corporate Shared Services
• • • • • •
Financial Management/ Reporting ERP Configuration Cash Flow Management Borrowings Human Resources & Payroll Legal & Regulatory
Impact on Developers: Real Estate sector has seen various transformations and innovations through its various players. Developers/ Promoter have been the key stakeholders for this industry since inception. RERA does not only regulate and restructure this segment of industry but due to the stringent guideline it will ensure that the sick, unorganized and unprofessional players either be a part of the organized sector or do not become a part of the sector at all. The stated practices had been the key reason that the buyers have lost faith in Real Estate sector. However, with RERA in place the developers will not be able to carry on further. Following are the reasons that RERA will streamline the process: 1. 2. 3. 4. 5.
Tedious Registration Process for the projects Registration of the project only after approval from competent authority Pre-Sales is not allowed, sales/ marketing or advertising can only be done after RERA Registration Provision of depositing 70% of the amount realised from sale in a separate account which will be utilised only for construction and land expenses (as defined under RERA Rules) Heavy penalties are levied on the promoters in case of contravention from RERA guidelines
RERA also defines certain guidelines for all the developer which include: I. II. III.
IV. V. VI. VII.
VIII. IX.
X.
The sale / agreement to sale should be made on carpet area only, where carpet area should be in compliance with the definition provided in the act Charges for parking area have to be shown in the official agreement The onus of completing the project in a particular time frame as mentioned in RERA registration lies on the developer, failing which he will face the penalty and can be sentenced for imprisonment or both They need to register the Real Estate agents under the project, only after that the agent can engage in sale/ purchase of the property in that project There should be no discrimination on the basis of religion, caste, culture or food preferences barring the potential customer Any minor modifications in the sanctioned plans need to have a prior written approval from min 2/3rd buyers Every detail (project plan, government approvals, land title status, sub-contractors of the project, schedule for project completion etc.) should be provided to the buyer about the project to maintain transparency The developer needs to register all the ongoing projects under RERA for which he has not received CC or OC Developer needs to form a society or association of the buyers for individual project and get it registered under relevant authorities and have to hand over the possession of common areas to the society within 3 months of receiving OC or when 51% of the allottes have paid the full consideration. This society should be formed within 3 months from the day 51% of the allottees have made booking in the project. The developer has to take care of maintenance services for a period of 5 years from handing over the possession to the society which was not defined earlier.
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As mentioned above, RERA will impact the unorganized and unprofessional players, the reasons include: A.
Compliance: - Players who are unorganized and unprofessional will find it tough to comply with the RERA guidelines majorly because of being incompetent to run the business in sync with RERA guidelines which now restricts pre-sales, diversion of funds for further land purchase, separate account for each project containing 70% of the amount realised from sales. These players were not following such practices hence it will be tough for them to survive once RERA comes in action. B. Better Cashflow planning – Considering the above clause of 70% collections from the buyers are to be deposited in a separate account, the developer needs to plan their cashflows and these funds can only be utilised for construction cost and withdrawal can be made after approval from Engineer, Architect and C.A. C. Heavy Penalties: - These small players were able to do business in such unprofessional manner because there was no strict monitoring on flow of money, timely delivery of project and deviations from the sanctioned plans. However, with RERA in place such practices will be penalised and even can be sent behind bars. D. Interest payments: - MahaRERA has clearly defined that in case of default from the developer end in terms of contravention of RERA guidelines, they need to pay interest to the buyer as per SBI rates plus 2% of landing charges. E. Defaulters list - Since there is a provision to put the record of projects done in past 5 years, so in case there has been any default in the past then the consumers can make their judgement whether to invest in such projects or not. Also as a guideline in RERA, if promoter defaults or contravenes from the guidelines then state authority can revoke their registrations & even upload the name and photo of promoter in their defaulters list and share the same to other states which can restrict them to move to other states. F. Become Customer centric – The focus of the project will have to be diverted from being developer centric to the buyer centric reason being the transparency imbibed in the system due to RERA guidelines. The above reasons supposedly will set up high entry barriers in this sector of Real Estate Industry. But if the other side of RERA is interpreted wisely for the small-scale developers with the intentions to stay in the industry and survive the initial hurdle is majorly registering under RERA, once they overcome it then RERA will be a game changer for them because of the following reasons: ▪
Standalone projects are comparatively easy to register, develop and deliver without much complications
▪
With increased credibility and performance of these small players, it will be a good option for NBFCs to invest in their projects for early and assured returns
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â–Ş
If these players are in compliance with RERA, it will bridge the gap bringing everyone to a particular industry set standard
So, for those good players who have the intention to give the consumer what they promised, RERA actually brings them at par with any big name (developer) in the industry.
Stakeholders’ sentiments: Frequency of launches
Unsold Inventories
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Buyer & Investor Confidence
Price Appreciation (Short Term)
Funding Scenario
Price Appreciation (Long term)
Competitive Scenario
•
The frequency of launches will go down, since all the approvals need to be in place before the launch
• •
Increase in transparency will increase the buyers and investors will have a boost in confidence
•
Developers and promoters are of the notion that in short term since people will be willing to sale
The developer and promoters are still neutral on the question of unsold inventory as they feel that the buyer sentiment is still “Wait and Watch”, however some developer feel that in case they have a ready for possession property for sale, they will be benefitted during the period ambiguities are there regarding RERA the property and safeguard themselves from RERA so there can be a possibility that in short term the price appreciation in the short term may not happen, however in long term since all the approvals need to be in place before any marketing, advertising or selling activity happen as per the guidelines of RERA
•
Since there will be a requirement for fund at the very initial stage of the project (land title, approvals) thus there is a positive sentiment about the funding scenario
•
Compliance with RERA and bearing the initial cost for the project will not be everyone’s cup of tea so that sets high entry barriers in the sector making sure only serious players stay in the sector
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Financial Institutions: A Investment firm / Individual can fund the project either in terms of equity or in terms of debt. RERA excludes the debt – originated relationship of firms with the developers. However, if the financing is done keeping equity – originated relationship as mentioned in the contract that the investor is getting dividend out of it then in that case under the definition of the promoter under RERA the firms can be considered as promoters if the developer defaults.
Impact on Investors: Investors have been the key source for fund inflow in the Real Estate Industry. Basic procedure by the means of which the Investment firms enter into a real estate projects is depicted by the figure below:
Financial Institutions / Investors Funding
Promoter /Developers
Land Owners
JDA / JV / OP
JDA – Joint Development Agreement JV – Joint Venture OP – Outright Purchase
SPV / Project
So, from the above process an investment firm becomes one of the key stakeholder of the project on the basis of their investment in the project. The amount of investment also entitles them to practice the decision-making rights in the projects. Earlier the Investors to ensure project completion in time could change the developer if they found the developer were unable to meet the set timelines. Also, they could recover their money from the developer by selling the property of the developer (land) Now with RERA in place, the PE Investors are exposed to: • • • •
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Treatment as promoters based on the type of engagement they exercise under the corporate veil Unable to recover their share by selling of the property Unable to change the developer/builder unless having consent of 66% of buyers/allottees Losing the first right of recovering the money by sale of project assets as the buyer has the first right on the property as per RERA
RERA also has some benefits to the investors apart from exposing them to certain issues, which includes: ▪
▪
▪
▪ ▪
The developer is bound to work efficiently and deliver the project in time Unlike before they need not to run behind the developer and monitor their activities With predefined timelines and compulsion to deliver on time, now even small projects can be a good investment and quick returns deal Since RERA registration requires all the approvals in place so this will result in increased financing from such institutions to meet the initial expenses of land deal and approval expenses RERA is expected to bring in more foreign investment in the real estate sector with increased buyer and investor confidence
Stakeholders’ sentiments: Funding Scenario
•
Investor Confidence
Financial Institutions have a positive sentiment that due to increased transparency, there will be growth in funding in this sector
•
Since all the approvals are in place and regulatory authority is there to look after the timely completion of the projects so that gives a boost to Investor confidence
•
There should be an increase in foreign investment in Real Estate sector
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Impact on Real Estate Agents: Pre RERA Processes majorly could be shown as
Negotiationg with the Developer/Promoter
Negotiationg with the customer
Initial Documentation support
Post RERA Process
RERA Registration
Information sharing
Initial Documentation
• Negotiation with the promoter • Registration under project by the promoter
• Giving project details to the buyer on the sanctioned plan • Shall not provide misleading information
• Documentation for the inital level
Role of Real Estate agent will be transformed after RERA comes into place. Earlier, Real Estate Agents were just a middle man between the developers and the buyers. There used to be certain issues because of such relationship • • •
Real Estate agents use to make promises about the project but many times were not aware about the status They would not take up the responsibility in case there were any default done by the promoters At times when the promoters default, the real estate agents used to flee
With RERA now, Real Estate agents will have to become more responsible, professional, organized and liable to provide correct information to the consumer, provide them with the approved project details including sanctioned plans, project completion date and in case the project has already started then they
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need to update the buyer with the percentage of project completion and along with keeping the buyer informed they are now liable to check that the advertisement by the developer contain no misleading information and they need to put their RERA Registration number in all their communications. Roles of Real Estate agent changes: • More of consulting and advisory in terms of sharing the information with the buyer and heling them to take informed decision • Maintain transparency and ensure that buyer is not provided with any misleading information • Accountability and professionalism making only serious players to stay in the sector The above stated impacts also ensure that the sector will transform into more organized and professional. The lack of accountability which used to prevail in this sector shall be ruled out post implementation of RERA. Not just the regulation of the sector but setting up checks and penalties will ensure that only serious and professional players stay in the business and this will help in development of the sector.
Stakeholders’ sentiments:
Transparency
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Buyer’s Confidence
Professionalism
• •
• •
•
Regulation and Development
Surely with RERA transparency will increase as even the Real Estate agents will have to be accountable for misleading advertisements RERA makes it essential for the Real Estate agents to have all information about the project and they are supposed to transfer the same to their clients so as to maintain transparency that means the agent has to be professional and organised RERA also states that unless an agent is registered under RERA, he cannot be involved under the sale / purchase of the project this brings regulations in the sector Heavy penalties put up by RERA will ensure only the interested players should stay in sector which will give an edge to the organized players and IPCs thus that will bring regulation and development in this sector in long term Real Estate agents have a positive sentiment that RERA will boost the confidence level of the buyers
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Impact on Buyers: As per data for major cities form the real estate research agency Liases Foras, it was observed that over 80% of the 25 lakh-odd residential projects launched over the last 10 years have been delayed. A quarter of these were delayed by more than 4 years over the promised date of delivery. The National Capital Region-Delhi accounted for most delays, followed by the Mumbai Metropolitan Region. Ahmedabad, Kolkata, Pune, Bengaluru, Hyderabad and Chennai didn’t fare much better. People who are impacted the most because of such delays are Homebuyers. Following are the key issues faced by the homebuyers: ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪
Delay in getting possession of the property purchased and false promises made not delivered at the time of possession Overcharging and varied interest rates at the time of default and lower rate applicable to the developer/ promoter in case of compensation Only 2 years of structural defect maintenance, to which there was no ensured time bound repair period In case of complaints filed, the cases would languish in judicial hierarchy for years Different definition of various terms like carpet area, common area, parking etc. leaving ample room for developers / promoters to tweak and manipulate law No credibility of the real estate agents and many were not to be found once the deal is done Plans were changed at the discretion of the developer many a times the buyers were uninformed Highly unorganized and opaque sector
These reasons instil insecurities in the buyer as the investments done were the lifelong earnings for majority of buyers and they would end up paying both rate and interest and still the possessions were farfetched dreams for many. Regulations were defined previously too but there was no check whether the projects were in sync with the regulations. Real Estate Regulations & Development act brings a new hope for the homebuyers and a series of safeguards for not just the redressal but also preemption of the same. It is a common notion throughout the real estate industry that this act is highly consumer focused and majorly ensuring transparency, speedy redressal, prior approvals and prevention from diversion of funds from the project. Key features of RERA beneficial for buyers: 1.
Transparency – RERA brings transparency to the system by ensuring the consumer can check all the relevant documents of the project right from the transfer of land title to the sanctioned plans. The developer/ promoter now need to disclose the date of project completion on the RERA website which also have soft copy of all the other relevant disclosures enabling transparency between the developer and the buyer.
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2.
3.
4.
6.
7.
Heavy penalties – In case of defaults from the developer, heavy penalties may be levied upon them which may be up to 10% of the project cost or imprisonment up to three years or both based on the jurisdiction. Since 10% is a huge amount (sometimes even the profit from the project may not be the same percentage) it is one of the checks, that the buyer’s interest is ensured. Both Parties at par – Post RERA, the developer cannot charge heavy interests in case the buyer defaults, but only charge the interest as defined by the state rules (in case of Maharashtra – SBI lending rate + 2%) and the same interest shall be paid by the developer in case they default till the period of default continues. Formation of societies – RERA specifies that the developer must make an application to form the cooperative society or any required legal body within 2 months from receipt of the occupation certificate (OC), or if 51% of allottees have taken possession after payment of the full consideration, whichever is earlier. This clears up a major area of ambiguity which has so far been a real challenge for residential property buyers in Maharashtra, and clearly puts their interests first. 5. Registration of the Real Estate agents – To increase the accountability the Real Estate agent must be registered firstly with RERA and secondly with the promoter under that project failing which they cannot engage in buy and sell of the property in that project making Real Estate agent accountable. So, agents cannot runaway in case the promoter defaults or they provide any misleading information and will be held liable and penalized for the same. Speedy complaints redressal – RERA mentions that within 60 days the complaints should be resolved or else a reason is to be documented for the same mentioning the issues for not resolving the complaint within the defined time Structural Defect maintenance – RERA clearly specifies that for a period of 5 years the promoter / developer shall be liable for the maintenance and that maintenance should be done within a period of 30 days. This ensures that the developers cannot run away free in case there is any structural defect in the property and also to minimize their future expenses on the project they will maintain good quality during construction itself
Above mentioned points instil the confidence in the buyers and safeguards their interests from the developers / promoters. So, RERA brings in transparency and bridges the gap between the various stakeholders who were earlier operating in very unorganized manner. Consumers are hoping that this act will restructure the industry and will put a cap on the anarchy which was prevailing so far. Also, the picture shown to the consumers for speedy redressal of the issues again a boost to the consumer’s confidence as if the law is implemented in the way its expected and stated then the industry will see buyers transforming from being hesitant to wilful investors.
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Stakeholders’ sentiments:
• •
•
Buyer Confidence
Speedy Complaint Redressal
Transparency
Regulation & Accountability
Buyers have a positive sentiment about RERA increasing the transparency and accountability in Real Estate sector Speedy complaint redressal as stated under RERA sounds lucrative, however looking at the infrastructure available and magnitude of complaints, buyers are still sceptical about it Penalizing and putting up all documents makes other stakeholders accountable, but looking into the act there has been no penalties on wrong approvals by C.A., Engineer, Architect and Lawyer which make the buyer sentiment a little towards the negative side
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Grey Areas still to be answered and Way forward: ▪
▪
▪
▪
Added layers without accountability – RERA adds additional layers of checks like approval from Architect, Engineer and CA for withdrawal of money from separate escrow account, however it nowhere mentions any process for check or monitoring whether they are sanctioning the right information as they are not accountable for any kind of penalization. Same applies to the lawyer who authenticates the legal title report. So, to strengthen the system, authority should include laws to make the approvers (CA, Lawyer, Architect and Engineer) held liable for approving the fraudulent activities in terms of penalization or other strict rules like suspension of licence etc. No guideline on delivering a minimum share of common amenities to phase wise projects – In case of a group housing project for example if the developer has promised to provide some common amenities like club house, gym, swimming pool, jogging track etc. when the project (group housing) is completed, but in such case, there is no guidelines that what minimum amenities the promoter has to provide along with each phase which makes it inappropriate for the buyers (say phase 1 out of 5 phases) of phase 1 as they will have to wait till all phases are over to access the common amenities. So, the authority should provide certain guidelines on a minimum share of common amenities which are to be allocated to each phase which makes it a fair deal to all the buyer of different phases. Power vested, no infrastructure – RERA has been vested with the power of civil court for handling the complaints, however primarily there is no procedure defined how the proceedings will take place, secondly there is no infrastructure for handling of the complaints as only one authority for whole state and magnitude of complaints will be very high. Authority needs to have wellbuilt infrastructure to carry out the magnitude of the expected workload in terms of set up of multiple justice benches across the state depending on the magnitude of complaints from various regions. Speedy redressal, just a statement – RERA’s objectives encompass that there shall be speedy redressal of the complaints, however it seems to be sceptical as RERA states that if the complaint is not resolved in 60 days then the authority needs to put a reason in writing for the same. Further if someone wishes to challenge the verdict of the authority, they can go to the Tribunal and further to high courts and so on as per the hierarchy. So, the whole concept of speedy redressal of complains stands diluted here. RERA has although provided a timeline of 60 days but looking into the present infrastructure, it seems quite unrealistic so to keep the objective intact the authority needs to give some strict guidelines for speedy redressal.
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â–Ş
â–Ş
Dilution of power of authority – The movement of the complaints from RERA to other judiciary bodies dilutes the power vested in RERA as the cases can be lengthen by dragging them to other judiciary bodies and that will ultimately affect the parties and further leads to extension rather than having a speedy redressal as mentioned above. The complaints filed under RERA should be resolved by the authority else the act will again see manipulation and tweaking by various stakeholders under various judicial hierarchies. Conveyance deed, discretion of developer - Maharashtra RERA permits the developer to submit approved and proposed project plan. The registration is done on the approved plans and developers are allowed to further extend the plans under the proposed plans whenever their FSI and other approvals happen. Now the question arises that in such cases when will the conveyance deed will be transferred to the society and in case any changes that will happen to the proposed plans (if registered as phase) will other buyers have a say in that. The answer to this stays unclear.
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Overall Sentiment Mapping:
New Launches
Transparency
Buyer & Investor Confidence
• •
• •
Speedy Complaint Redressal
Price Appreciation
Regulation & Development
New Launces shall go down in short term since all the approvals should be in place prior the agreement to sale Speedy complaint redressal still remains sceptical and there is a neutral stance of the stakeholder keeping the infrastructure and magnitude of complaints in consideration Transparency in the industry shall increase undoubtedly due to digitalization of all the documents and audits and same shall be uploaded on the website Buyers and Investors’ confidence has gone up since now the projects will have to be completed in given timeline and the funds can’t be diverted anywhere apart from constructional purposes
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•
•
Price appreciation still remains a neutral stance as stakeholders believe that in short term the prices may go down for the sale of unsold inventory, however for future projects the prices will go up. Regulation through RERA has a very structured format, but when it comes to development, the act is not very clear on the development part since putting restrictions and heavy penalties on developers and real estate agents, but there is no specified guideline towards reduction in approval time, single window system for clearance etc which contribute majorly towards the project timeline extension.
But overall there is a positive sentiment about the act, leaving the tedious compliance and registration process, the organised players will find it beneficial as this will put a demarcation between them and the unorganised players. At the same time since, entry barriers are high post implementation of RERA so the players who are willing to stay in the sector will have to be professional and adhere to the guidelines or else heavy penalties can be levied upon them. RERA brings new hopes to the buyer segment as with increased transparency they can now instil trust in the projects and can expect possession in time and will be entitled to sure compensation in case of default. Also, increased maintenance period made it necessary for the developers to ensure the quality of workmanship should be up to the mark. Separate escrow account for construction purposes only this indirectly blocks the profit of the developer in the account till the construction is done and he cannot withdraw all the amount, so it ensures that the developers have a direct pressure to complete the work in time. Now since the developer/ promoter will have to do the planning and designing prior the project and get all the approvals before the sale / agreement to sale can be done this also ensures that the developer/ promoters also will have a clear demarcation on the profit they will be making and the cost they will have to bear making it easier for developers to arrange funds and plan cashflows accordingly. Moreover, with increased fund requirements now, the investment firms will have more investment opportunities. The whole gamut of RERA and its effectiveness lies on the implementing states and their respective authorities. The essence of RERA is regulation and development and if the states keep up with the spirit of central act by allocating required resources and infrastructure then RERA will be the game changer of the Real Estate ecosystem and will transform it from just being a sector to a more regulated industry.
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Annexure - 1
Questionnaire for Developers & Promoters 1. What is the present scenario of the Real Estate Industry? How do you see the industry post proper implementation of RERA? 2. RERA states that no promoter can market/advertise/sale their projects without being registered. Also, it is compulsory to have all the approvals in place prior to the offer for sale, which will surely increase the overall project cost. How will this impact your project timelines and cashflows. What will be your strategy to mitigate this impact? 3. Under RERA each project needs to have a separate escrow account where 70% of money realized from allottees is to be deposited and same can only be withdrawn only after approval from Architect, Engineer and CA. How will this impact your cash flow? What is your strategy to overcome this cash flow scarcity situation? 4. Do you think RERA will lead to increased joint venture/ developments or consolidation of Industry? How will all of the above combinedly affect your business model? 5. For making any changes to the sanctioned plan, now developers will need to have a prior approval of 2/3 of the people who have brought the property. Will this affect the completion of project in time? How do you plan to come out of such situations? 6. For ongoing projects which have not yet received OC from the competent authority, they need to be registered under RERA with new defined timeline and details of the property sold in the current project. How do you think will this impact your ongoing projects cashflows and timelines? 7. As per RERA property will now be sold on carpet area and not on super built up area. How will that impact your business? What is your strategy to rule out this situation? 8. With implementation of RERA frequency of new launches is expected to go down. Will the immediate delay in the launch of new projects help in reduction of unsold inventory (short term)? Also, are you aware about the heavy penalties levied on both promoters and developers in case they don’t comply with rules and directions of the authority. Does it build up high entry barriers to industry? How will this help in restructuring of the Real Estate Industry? 9. Will RERA help in pulling more foreign investment in real estate sector? Can it be mitigated, if so then how?
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Questionnaire for Financial Institutions: 1. Under RERA, Investors can be labelled as promoter and may have to face strict penalties for any violation of rules by the projects they fund. How this impacts your firm? If any specific impacts then how do you plan to safeguard the interests of your firm? 2. Earlier, if the developer was found unfit for the project, the investors could introduce new developer but RERA now restricts to do such changes without prior approval from 2/3rd investors. How does that change things for players like you? 3. Some Investors are trying to dilute their share to get an exit from the real estate projects to save themselves from coming under the ambit of RERA. What impact will it bring to investors and they will not be making profitable exits? And what will happen to those developers if the Investors exit the projects. 4. “RERA is set to provide a fillip to the overall real estate funding environment�. What are your comments on this statement and do you think that this will impact the small-scale developers majorly? 5. RERA is a protection to the customer; it’s not a protection to the high-cost lender. Your comments on the statement
Questionnaire for Real Estate Agents: 1. What is the present scenario of the Real Estate Industry? How do you see the industry post proper implementation of RERA? 2. RERA makes it necessary for Real Estate Agents to be registered by promoters for particular project without which they cannot be involved in sale/purchase related to that project. How will it affect your business? Do you feel that agents will now be only limited to only a certain number of projects? 3. RERA now makes the Real Estate agents more than just being a facilitator to more of an advisory/ consultant between Developers and Buyers. Do you think that with RERA in place the unorganized and unprofessional Real Estate agents will find it hard to survive and this can result into their removal from this sector? Will this step help in strengthening of position of Agents in the Industry by setting up of high entry barriers? Are you well equipped to be a part of organized real estate agents? If not how do you plan to achieve the level? 4. How else you find RERA impacting you and what steps are you taking to prevent your interests being at stake. 5. RERA makes it mandatory to keep the books of accounts for individual projects updated and available for audit, so how will it impact your cashflows and planning and do you find any positive sentiment about it? 6. Since the penalty levied in case of violations of rules defined by authority is heavy, do you think that you should increase the brokerage since the risk is more and how your increment will be affecting the real estate industry (Developers & Buyers)?
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Questionnaire for Legal Heads 1. What is the present scenario of the Real Estate Industry? How do you see the industry post proper implementation of RERA? (in terms of legal perspective) 2. What will be the change in / additional responsibilities for Developers for legal compliance with new RERA guidelines? 3. Since RERA emphasises that the land title should be with the developer authenticated by legal practitioner, will it bring any change is business processes or it was a practice earlier too and now will be followed more strictly under RERA? 4. What will be the procedure of proceedings of complains under Regulatory Authority, since under RERA it has been vested powers similar to a civil court? 5. RERA mentions that in case the promoter defaults, the management (Directors and senior managers) can be imprisoned. How can the senior management be saved from getting in those circumstances? 6. Since RERA makes the project delivery compulsory on time, no changes in sanctioned plans prior approval with 66% of allottees, penalties for defaulters and interest rates clearly defined, do you feel that now there will be speedy redressal of the complaints, as defined as one of the objectives of RERA? How will the processes change from filing the case in a civil court to getting the verdict under RERA?
Questionnaire for Buyers 1. With RERA in action do you see real estate sector moving towards transparent and more organized business? 2. Now that RERA mentions that even Directors of the company can be penalized (imprisonment), how do you see this impacting the consumer sentiment? Do you feel this will build more confidence in the buyer? 3. Are you aware that promoter/developer can charge interest as per RERA guidelines, which means in case of default from allottee’s end, the allottee can only be charged interest which adhere to certain guidelines? How do you see this decision? 4. Do you know that once RERA is in place, the new launches will go down for a short term? Will you be willing to invest in the unsold inventory or you want to wait for the new launches in long term? 5. Post demonetization, does RERA brings any soothing to the property buyers? 6. What were main pain points of the buyer and do you think RERA will be able to soothe the buyers significantly on these pain points? 7. Which points were left untouched by RERA and do these points impact your decision making while purchasing a property? 8. What is your sentiment about the real estate sector after RERA is in place?
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References: 1. 2. 3.
https://maharera.mahaonline.gov.in/ https://home.kpmg.com/in/en/home/insights/2016/03/real-estate-construction.html http://realty.economictimes.indiatimes.com/news/industry/rera-this-is-how-builders-expertsreacted/58456092 4. http://www.financialexpress.com/money/real-estate-5-ways-how-rera-will-impact-thedevelopers/649200/ 5. www.livemint.com/Companies/5P2gvJ8eUojc1vz0fgR2hJ/RERA-comes-into-effect-tomorrowonly-13-states-notify-rules.html 6. http://content.magicbricks.com/uncategorized/how-rera-will-impact-the-real-estatemarket/89796.html 7. http://www.asiapacific.joneslanglasalle.com/India/Mailers/RERA.pdf 8. https://www.projectguru.in/publications/real-estate-regulator-bill-rera/ 9. http://www.firstpost.com/business/rera-with-state-govts-diluting-key-provisions-can-the-actprotect-buyers-at-all-3421172.html 10. http://www.financialexpress.com/money/how-rera-will-impact-organised-commercial-realestate-sector/649151/
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