How RERA brought the real estate on track
Vivek Gadhe, head, construction (affordable housing), Rustomjee Group, avers that RERA has catapulted the real estate sector to an authenticity that was hitherto absent
There was a time, not too long ago when booking a home was like playing the lottery – if you took a chance with a new developer, chances were that a decade later you would still be waiting to move into your home. The real estate sector was hopelessly unregulated, and a lot of transactions happened in cash and generally buyers and investors were dissatisfied with the general order of things. Other than a few trusted and reputed developers, the realty sector was viewed as a risk. And this is a sector which is the second largest employer in the country after agriculture.
RERA comes to town
The aim of introducing RERA was simple – protect the interests of home buyers and instil a sense of confidence in investors in the sector. It was no surprise when some of the earliest projects to get registered under RERA were by those same reputed developers who had, as a matter of principle, been following the fair practices listed by RERA.
With RERA, buyers were assured that developers would use the funds for that particular project only. Proper planning and details of every stage of construction were available to buyers. RERA ushered in an era of full disclosure in the realty sector.
Keeping the date
Perhaps the key benefit that buyers have derived from RERA is getting a definite date for possession of their home. Delay in projects was due to diversion of funds by developers from one project to another. RERA stipulated that 70% of all received funds have to be parked in an escrow account.
Moreover, RERA has incorporated a stiff fine of up to 10% of the project cost in case developers renege on the delivery date registered with RERA. Now buyers have an authority they can appeal to when builders fail to keep their promises. Earlier, some developers would draw up skewed documents wherein the buyers would be imposed with a heavy fine/interest in case of delay in payment, but there was no reciprocal fine to be borne by the developer in delaying possession.
Some developers are now adopting a different tack. Given that RERA is strict in imposing delivery dates, they are putting in buffers when the projects are registered with RERA. Thus, a developer would give a buyer a certain date in the sale agreement but put in a date for a year later with RERA to give themselves a safety net as it were. The MahaRERA Chairman is considering making the sale agreement date as binding on developers and it remains to be seen if this will be implemented.
Another factor is that with RERA developers focus on giving possession of the homes as per the specified date. This implies that the other deliverables like common areas and amenities would, in some cases, take a backseat and buyers would be moving into a completed apartment but not necessarily a completed project they had opted for.
RERA has played an important role in bringing the real estate sector on track. Developers are able to get funding. Buyers are considering under construction projects as opposed to a few years earlier when only completed projects were seen as a sure bet. Most of the project management techniques need to be implemented thoroughly. Many of the projects are cost and time overrun which has impact on project funding.
As a developer, emphasising to design and using them to articulate the structure into 3D models has proven to be effective.