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25Th Aug 2016
The Real Estate (Regulation and Development)
Act (RERA) is being touted as the ultimate saviour for buyers, but most
stakeholders still have doubts over the draft rules for the RERA circulated by
the government. The Total Investment
& Insurance Solutions
According to Pankaj Kapoor, Founder and
Managing Director of Liases Foras Real Estate Ratings and Research Pvt Ltd, the
punitive measures (in RERA draft rules) have been eased out and there is no
clarity on the extent of disclosure of the status of under-construction flats
by developers. "Will the developer register with the latest sanctions or
should the previous changes be accounted for? Will the consent of two-third of
buyers for change in layout be applicable on existing projects? Will an already
delayed project fall under the ambit of RERA? These are some of the pressing
questions that still need to be answered. We hope the final draft addresses
this ambiguity and the interest of buyers are safeguarded with retrospective effect,"
he said. The Total Investment &
Insurance Solutions
As per Mr Kapoor, the bone of contention this
time is the nature of plan submitted by the builders. He said, "A
particular group fighting for this pointed out that the draft rules lacked
clarity as to which plan the builders of existing projects need to submit while
registering with the regulator - the original, sanctioned plan or the latest
version. We believe it is in the best interest of the buyers if the builders
submit the original plans because the latest plan may have been revised many
times. In addition, there is ambiguity over the schedule of completion of
projects. There are penal clauses in RERA but in the absence of specific rules,
the authorities will not be able to bring errant promoters to task."
In a report, the non-brokerage research
centric firm, also highlighted execution delays, unfair pricing and recent
judgements from consumer forums against developers. It said, "It is indeed
intriguing to see that the National Consumer Disputes Redressal Commission
(NCDRC) is dealing with errant developers with an iron hand. In the past, it
brought Unitech and Lodha to task and now it is Jaypee Group, who is facing the
music. While the Supreme Court has stayed the penalty order, two other rulings
are still under review. However, it is sad that even with RERA looming on the
one hand, and the consumer court rulings on the other, delays remain a bitter
truth in the Indian realty sector. If the apex court does not retain the
rulings of NCDRC, it may not give any further orders to defaulting developers
in future. It is no secret that the sector cannot attain efficiency if
execution delays and unfair pricing tactics are not sorted out right
away."
"When we talk of affordability, we only
talk about pricing in general," Mr Kapoor said, adding, "There,
however, are many external factors beyond the control of a developer or buyer
which affect affordability. One such factor is stamp duty and property taxes.
While cities like Gurgaon saw a reduction in stamp duty a few months back,
there are others like Nagpur, which await increased stamp duty and property
taxes. While we are doing everything possible to boost affordable housing,
state governments must do a thorough reality check to assess whether such
increased levies are feasible at this juncture. If at all any increase in taxes
and duties is unavoidable, the quantum of hike must be checked. The market is
very price sensitive any such move may prove to be detrimental in the long
run."
The report also highlighted the issue of
vacant houses. The government declared that over two lakh houses, constructed
under Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and Rajiv Awas
Yojana (RAY), are still lying vacant. The highest number of vacant houses is in
Maharashtra with 41,449 units, followed by Delhi (26,199), Gujarat (24,769),
Andhra Pradesh (20,639), Telangana (17,982) and Uttar Pradesh (16,050).
"This is one of the biggest anomalies of the real estate sector, where
millions are homeless and slums are proliferating, while over a lakh units lie
unoccupied. This is clearly indicative of a missing dimension in the cycle that
needs to be addressed," the report from Liases Foras said.
However, there is also some news that added
cheer to the market. Market regulator Securities and Exchange Board of India
(SEBI) issued a consultation paper making various proposals to make real estate
investment trusts (REITs) attractive. These include relaxation in pricing and
valuation norms, minimum number of investors and increased investment in
under-construction properties. "So far REITS have garnered tepid response
from Indian players despite relaxations and flexibilities announced from time
to time. It remains to be seen as to whether the current set of relaxations
actually lures participants to REITS,' Liases Foras added.The Total Investment & Insurance
Solutions
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