Making project under construction fully compliant with RERA would be absurdly inconvenient and prohibitively expensive, some developers say
The Confederation of Real Estate Developers’ Association of India (Credai) stoutly opposed the provision in the Real Estate (Regulation and Development) Act to bring current projects under its ambit.
“This is not only time consuming but also poses insurmountable difficulties in determining the nature and scope of regulation for current projects,“ Getamber Anand, president of Credai, said.
If a project has already been sold to the extent of 50% and construction is underway, it is practical impossibility to make 50% of the project compliant with the act; on the other hand, making the project fully compliant would be absurdly inconvenient and prohibitively expensive, Anand said.
However, Creadi has set great store by the assurance given by urban development minister M Venkaiah Naidu to Parliament that he would consider excluding current projects from the ambit of the legislation while framing the rules.
Also, the act has to be re-enacted in every states as real estate is a state subject. Each state will have to frame rules to regulate the sector and appoint a regulator who will adjudicate the regulatory framework. Various state governments like Gujarat, Haryana, and Maharashtra have already assured Credai that they will not include the current projects under the ambit of the new act.
In Noida, Greater Noida, and Ghaziabad, the UP government will have to take a call on erring developers. A senior official in the authority said that they cannot turn a blind eye to the mischief of erring developers in current projects. The national capital Delhi, too, has a number of projects running much behind schedule. The new law will bring solace to customers here, it is expected.
Sanjay Dutt, MD of Cushman & Wakefield, India, citing the provision of depositing 70% of the sales proceeds in an escrow account, said the new law is harsh on developers. He said this will put a lot of pressure on builders.“I fear prices will shoot up and it will be passed on to consumers,“ Dutt said.
At present, as the land cost–which comprises over 50% of the entire project cost in metros–is already born by developers before the launch of a project, they use a substantial portion of the sales proceeds in other businesses. Now, if they keep 70% of sale proceeds in an escrow account, its interest cost would also be included in the project cost and, therefore, be borne by the customer.
With the passage of the real estate law, the housing sector is all set for `infrastructure’ status, Credai said: “With the passage of the law, the last hurdle in treating housing projects as infrastructure projects also gets removed. To reap full benefit from the law, it would be timely and appropriate that the ministry of finance extends the long elusive status of `infrastructure’ to housing projects.“
Rajeev Talwar, CEO of DLF Ltd, said: “The setting up of the Real Estate Regulatory Authority (RERA) will usher in much needed transparency and pave the way for implementation of standard practices across the sector.Even though some clauses are heavily stacked against builders, we believe that this law has the potential to transform our industry. The law does not touch the issue of single window clearance; it also needs to hold local bodies and authorities, banks, contractors, financial institutions accountable and we hope they will come under its ambit in future.“
Manoj Gaur, president Credai NCR and MD of Gaursons India Ltd, said: “This is an important development towards the regulation of realty sector and to provide relief to homebuyers. The amendments which were made to the bill last year aimed to promote transparency, greater accountability, protection of homebuyers and investors, and efficient working in the sector.“
R K Arora, chairman of Supertech Ltd, says: “The legislation would definitely provide clarity to buyers on various aspects of housing projects at the time of investing in the project as it is mandatory for developers to post in advance all information on issues like project plan, layout, government approvals, land title status, contractors to the project, schedule for completion with the state RERA.“