With RERA (Real Estate Regulatory Authority) coming into effect from 1st May 2017/31st July 2017, Real Estate sector is going to change a lot. Till now it is the most un-organized sector in India however it provides maximum GDP contribution and directly /indirectly most numbers of Jobs. It is need of time that with RERA coming into picture we should start moving towards professionalism /transparency in this sector which is most touchable /emotional decision of anyone life.
With this coming in effect, Consultant/brokers will also need to get a Unique ID number or registration number so that it is easy to track when needed by customer/builders.
All other financial decisions having one or another authority like SEBI/IRDA/RBI to control financial transactions or service levels but unfortunettly biggest financial and emotional decision of anyone life not having any authority from independence till now.
We all that this will bring stoppage to pre-launch / more financial control on money flow / utilization of project funds only in project/ more accountability and penalty if project is delayed beyond certain point but with all this, there will be impact on pricing/project execution / customer care/ financial planning of builders in both positive and negative ways….
Prices will go up after RERA implementation
After stabilization of RERA this is sure that prices will start going upside in all part of India and all new launches will have higher prices due to:
- Delivery time of project will increase or atleast builders will start having more buffers time to safe guard them. Like Last month one project launched in Gurgaon with delivery time 5 years as written for customers.
- Cover the delay period heavy penalty, so they have to increase their margins to cover this.
- Now only established or serious players will be in this field and all non-serious or first timers will go away. With limited numbers of player and projects, slowly-slowing demand/supply ratio will be disturbed and demand will be more than supply and it will push prices towards upside.
- Developer cannot withdraw more than 30% amount from the project(70% needs to be utilized for the project) so builders after selling initial stock will not be in hurry to sell more until they need fund for any new project.
- With strictly banned on pre-launch, cost of projects will go up as mostly in India, builders after taking land and before starting construction used to have pre-launch or soft launch to recover the invested amount or have money for construction from customers instead of putting their own money or taking loan from any banks.
- There is huge mis-match in definition of super area everywhere in India. For example in Noida/NCR, typically loading on carpet area is 20% to 40%. This gap is huge and now everyone has to follow same rules so builders who were putting more loading to show less costs will be trouble so they have to increase rates to cover this thing.
- There is clause of Defect warranty for quality of construction and products which are being used so builders need to cover this defect risk or customer(s) going in litigation for construction quality. Covering of this cost will push builders to have more margin or bandwidth to recover this loss if any defect found in anything related to building.