Bottom Line: In the absence of clarity over powers & functioning of regulatory authority, the developers are trying to play it safe now.
A week or two is too short a period in the lifecycle of a real estate project. More often than not this time is insufficient for even a drawing board sketch or the blueprint. How come then the market is expecting the eco system of the business to change so soon post the implementation of RERA (Real Estate Regulatory Act)?
The expectation of an overnight change is because the Act is a result of years of expectations on part of the buyers. The developers, on their part, are also changing their business strategy overnight to play it safe with the new regulatory regime.
Of course, there are a number of areas where even the developers are awaiting for clarity as to how RERA will affect their business. They are nevertheless tweaking their business strategy. For instance, some of the developers are asking their homebuyers to shift to completed apartments in adjacent towers in the same project or other projects, so that the undelivered towers with few buyers remain unsold and thus, outside the purview of the regulator.
There are other developers who are reworking their marketing strategies, to offer properties to buyers on carpet area and not the super built-up or saleable area. The ‘build and sell’ model is suddenly being evaluated by developers to avoid falling within the ambit of the regulator.
Projects that are nearing completion are being expedited to apply for OC (Occupancy Certificate). Large projects are being re-submitted for approvals, with phase-wise construction and delivery schedules.
RERA quick effects
Developers immediately adjusting to be RERA compliant
Some of the developers asking homebuyers to shift to completed apartments in adjacent towers in the same project or other projects
Marketing strategies are reworked to offer properties to buyers on carpet area
The ‘build and sell’ model is being evaluated by developers to avoid falling within the ambit of the regulator
Large projects are being re-submitted for approvals, with phase-wise construction and delivery schedules
Rahul Shah, CEO, Sumer Group agrees that RERA aims to bring in the much-needed discipline in real estate sector. According to him, the sector will see a serious change in terms of a more transparent, competitive, value offering, hassle-free and definitely consumer-focused industry. It is directed to aid a regulated market in the real estate sector and it will act like a boon making a positive impact both on developers and on buyers.
“Many developers have started to re-design their business practices and processes to suit the regulations perfectly. Developers are now being more cautious about the norms announced by the Government so that they are well adept to the terms of RERA. We are looking forward to this new change in real estate,” says Shah.
Since the developers can not advertise without Occupation Certificate and Completion Certificate (CC), the marketing campaigns are being reworked to focus more on the corporate advertising than the sales advertising of the projects.
These are some of the significant changes that have brought smiles back on the faces of homebuyers. They have for long waited for a market where the dialogue and delivery could be fair to all. Analysts point out that developers will try their best to avoid litigation, till there is greater clarity on the functioning of the regulator and the possible grey areas.
There is a widespread feeling that with alternate strategies, like build and sell, smaller projects and escrow accounts, speculative elements from the market will be wiped out from the market. Real estate may no longer be a trading commodity to make money during the construction cycle. This may make houses relatively cheaper, as ready-to-move-in apartments, will not change many hands before an end-user actually buys it.
RERA has been awaited for long by the homebuyers. The anticipation of such a regulation has been to build equity amongst the stakeholders, create accountability, promote delivery driven project execution and facilitate financial and administrative transparency. The present RERA is expected to fulfill all these needs, even though it is not clear as to how the Authority will deal with the delays in approvals.
Though the developers are apprehensive that the compliance burden is heavy, the Act has provided the right impetus on ensuring that all due diligence which the consumers may require are fulfilled. This will go a long way in restoring consumer faith in the real estate sector.
By: Ravi Sinha
