NEW DELHI: Real estate regulatory Act (RERA) does not focus much on the problems faced by developers to help them facilitate and expedite the project execution process, but mainly focuses on provisions for ensuring timely and orderly delivery of projects, according to rating agency ICRA.
“The provisions of Act hold significant importance for buyers and investors, but problems faced by developers, including multiplicity of approvals and lack of adequate funding avenues, continue to remain unaddressed in the Act,” said Shubham Jain, vice president, corporate sector ratings, ICRA Ltd.
However, the agency feels some of the prominent benefits likely to ensue from the RERA regulation include elimination of fraudulent developers and agents, facilitation of informed decisions by the buyers, increased standardisation and improved accountability for timely execution as well as appropriate use of customer funds.
While the commercial real estate sector has picked up pace in the past one year, the residential real estate sector has been going through a prolonged slump with subdued demand on account of high real estate prices coupled with weak consumer sentiment and general economic uncertainty.
This coupled with supply side constraints like various supply side challenges such as delays in receipt of approvals as well as paucity of manpower and working capital funds, which has led to delays in project execution across micro-markets.
According to ICRA, the project execution cycle, which ranged between 3-4 years, has extended to as much as 6-7 years.
“The opaque nature of the industry coupled with the lack of regulatory bodies thus far has resulted in significant asymmetry of information as well as skewed balance of power between the developers and the buyers,” said Jain.
ICRA also feels the recent consumer activism coupled with the pro-active stance by the judiciary is a positive step towards protecting the interest of buyers in the industry.
Credits ET Realty