1. Efficiency of capital: 70% of the sale proceeds to be kept in ESCROW account is in line with prevalent practice in developed markets.
In a mid segment housing segment, the land cost is typically Rs 1,500 per sq ft, construction cost is Rs 2,500 per sq ft and margin of the developer is Rs 1,500 per sq ft. By retaining 70% in the ESCROW after the sale of the apartments, we are compelling developers to lock their capital and are taking away flexibility of efficiency of capital from prudent players. This inflexibility may prove to be a deterrent for attracting requisite domestic and offshore capital to the sector.
We also have to be cognizant of the fact that the Indian developer is thinly capitalized and this may impact supply in future.
2. Ease of doing business: While the responsibility of the developer has been clearly defined, the responsibility of approving authorities will be vital in ensuring successful implementation of the proposed regulation. For instance, a developer launches a project after obtaining all approvals and registration with the real estate regulator of the state but on completion of the building he is left to the whims and fancies of the approving authorities for getting the completion certificate. It means he can be subjected to harassment at the hands of corrupt officials and politicians.
Since penal provisions include harsh punishment and penalties, a suggestion is that a certificate by an empanelled architect for completion should be deemed occupancy certificate since the developer has completed his deliverables.
3. Regulator should be effective with requisite infrastructure and bandwidth:Last but not the least we wish that the regulator is effective and adequately staffed for proper implementation of the regulation with speedy, effective and fair redressal mechanism.