Members welcome new law but worry over impact on ongoing projects
London, August 14:
Several hundred members of the Confederation of Real Estate Developers Associations of India (CREDAI), gathered in London last week and over the weekend to consider the state of the Indian real estate market.
While delegates debated the changing dynamics and opportunities in the market – as well as the opportunities in Britain, which is keen to lure investment from India into different tiers of its real estate sector, it was the Real Estate (regulation and development) Act 2016, better known as RERA which dominated, as representatives voiced their concerns particularly over the legislation’s impact on ongoing projects.
RERA, brought in to protect the interests of home buyers, and codify the running of the real estate sector in India (with the aim of boosting investment in the sector in the long term) came fully into force on May 1, with individual States required to declare the rules within a 90-day period.
While CREDAI says it welcomes the regulation of the industry – which it believes will help weed out unscrupulous developers and set higher standards – its members are concerned around the law’s provisions regarding ongoing projects, warning that it could have long-term, negative reverberations for the industry, ultimately hitting supply and pricing.
Part of the problem lies around the lack of clarity of what constitutes an ongoing project, says Prakash Challa, the Chairman of Chennai-based SSPDL Ltd. He says the law is actually un-implementable when it comes to ongoing projects in a number of ways – ranging from its treatment of common areas in buildings to the defect liability period specified in the Act, to the legislation’s requirement to place 70 per cent of proceeds from the project to be placed in a separate account.
Under the law, developers have 90 days to register ongoing projects, but with many States having pushed close to the deadline to declare the rules (Maharashtra was the only State to declare them from the outset), developers have been struggling to meet the 90-day registration process, leaving them potentially in breach of the legislation, and unable to market or sell their projects.
“Irrespective of what reassurances the States are giving or not giving on this count, the Act prevails so technically speaking you are in violation,” says Jaxay Shah, the national president of CREDAI, who is calling for clarity.
“We welcome RERA and we are not shying away from laws but this is a serious and most fragile situation.”
“Short term there has to be a pragmatic solution for RERA on ongoing projects,” says CREDAI Chairman Getamber Anand,. He argues that in its effort to protect customers, the legislation is in danger of going to the other extreme, potentially risking the long-term goal of increasing secure and affordable housing.
“In the legislation there is no place where we can go as developers, if we don’t get a completion certification in time for a completed project, there is no provision if I don’t get the electricity connection, the water for my completed project…there is a documented shortage of housing which is why we have the ambition of housing for all by 2022, but why are we actually shooting ourselves in the foot?”
(This article was published on August 14, 2017)
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