MUMBAI & BENGALURU: A bill to regulate the real estate sector, which was passed in the Rajya Sabha on Thursday, is expected to ease the concerns of home buyers, including delayed deliveries and layout changes. Builders are expected to benefit as higher transparency and accountability will attract institutional fund flow.
The Real Estate (Regulation and Development) Bill paves the way for setting up a regulator to offer buyers protection from unscrupulous activities.
The scope of the bill has been widened beyond the recommendations made by a select committee in December.
Tussles over project delays are likely to come down as 70% of the amount collected from home buyers will need to be deposited in an escrow account for use in the project instead of a minimum of 50% suggested earlier. Developers say this needs to be supported with faster approvals.
“With this, much-needed transparency will come into the realty sector. However, on the liquidity front, it’s not going to be easy for anybody. Interest rate cost can go up by as much as Rs.50 per square foot as money being escrowed would mean a developer will have to arrange for liquidity from other channels. However, faster approvals, including environmental nods, can offset this impact,” said Niranjan Hiranandani, CMD of the Hiranandani Group.
“This will also help builders not to get over-leveraged as the money cannot be diverted and will be limited to projects. We need to see how state governments implement this as real estate is more of a state subject. Selling on carpet area will have some impact as the cost of compliance will have to be factored,” said Om Ahuja, CEO-residential of Brigade Group. Apart from buyers who are expected to be the key beneficiaries of the bill, developers will gain from timely delivery of projects and greater customer confidence.
“It will create a much-needed consumer rights protection umbrella for buyers of real estate, thereby increasing consumer confidence as well as creating lasting developer brands strong on quality and timely delivery of their projects,” said Anuj Puri, Chairman & Country Head of Jones Lang Lasalle India.