Home prices may rise, as small builders consolidate

NEW DELHI: Small real estate developers might consolidate and home prices may rise in short to medium term after the real estate regulatory authority bill gets implemented, say industry experts.

The clauses in the bill to deposit 70% of the project funds in a separate account and registration of under construction projects only after all the approvals in place might hit the already cash-crunched small sized players, mentioned experts in a Live Hangout session with media.

This might also increase the project holding cost for real estate companies, which is likely to result in a price rise.

Real Estate regulatory bill should not act as a barrier for small developers and the government should offe better financing mechanisms for their survival,” said Dr. Madalasa Venkataraman, Faculty, Indian Institute of Management – Bangalore.

Experts said giving industry status to the real estate sector or a relook at the sensitive sector exposure limits of the Reserve Bank of India might help ease this problem.

“The bill aims to flush out the non serious players, who divert funds from one project to another, which might lead to consolidation for sure,” said V Suresh, Former chairman and managing director, HUDCO and Advisor Good Governance and Municipalika.

Compliance cost for builders is set to increase, which might get passed on to the end consumers in the next 12-18 months. “However, we can see stabilisation of prices in the next 24-48 months,” said Om Ahuja, CEO, Residential business, Brigade Enterprises Ltd.

Venkataraman from IIM-Bangalore, however, feels prices could also go down. “Short term compliance cost will surely go up, but if approval process is properly implemented, with builders having proper source of funding, we can see home prices going down,” she said.

The bill mandates the regulatory authority to provide project approvals within 60 days, failing to do so without any communication to the developer can be considered as deemed approval. However, each state will now have to form their own regulator, and have liberty to set the time-limit of approval process.

The Lok Sabha on Tuesday cleared the Real Estate Regulator Bill, almost 7 years after being introduced for the first time. The bill got a nod from Rajya Sabha on March 10, 2016. It will now be sent to the President of India for approval, after which it becomes a law.

However, experts say the process of all the states forming their own regulator might take at least one year.

Credits ET Realty

Leave a Reply

Your email address will not be published. Required fields are marked *