India’s real estate market has been witnessing a steady tightening of regulations to bring in much needed transparency in the market. This includes implementation of the Real Estate Regulation and Development Act of 2016 by the Real Estate Regulatory Authority (RERA), and the amendments made to the Prevention of Money Laundering Act (PMLA) that occurred during demonetisation.
According to property consultant JLL India’s Global Real Estate Transparency Index, India is ranked 34th globally this year. This is predominantly due to regulatory reforms, enhanced market data, and many sustainable initiatives. The progress made in the country’s Real Estate Investment Trusts (REIT) framework has helped, too.
Organised players in the market, including Godrej Properties, Sunteck Realty, Brigade Enterprises and Prestige Estates Properties, they have greatly benefited in terms of gains in market share, increased buyer confidence, and consolidation.
While all these reforms are positive for the overall market, their implementation has been quite uneven across the country. For instance, the RERA came into effect in May 2017, with an objective of bringing in fair practices to protect the interests of the home-buyers. But its implementation so far has not been uniform across different States.
Towards a more organised sector
The regulatory changes in the real estate market, such as the amendment of the black money Bill, reduction of GST rates (one per cent for affordable housing and five per cent for others), and tightening of lending norms, have not only brought in transparency but has also made the sector more organised.
Consider the case of RERA. So far, there are about 53,700 real estate projects and 41,200 real estate agents, registered under RERA across the country. The real estate authority has disposed of a little over 48,700 cases in the country.
Almost all the States and Union territories in the country have implemented RERA, with Maharashtra being the frontrunner. It has the highest number of projects, agent- registrations, and has cleared the maximum number of complaints, setting a benchmark for other States to follow. As on July, the State has disposed of over 7,800 cases.
“Implementation of RERA has helped bring transparency, benefitting Sunteck Realty greatly. As we were already complying with the existing regulations, RERA rules have only made us more disciplined. For instance, even before RERA, Sunteck already had a separate account for each of its projects,” said Kamal Khetan, Chairman and Managing Director, Sunteck Realty.
The steady implementation of RERA across States has slowly started to revive confidence in the real estate market.
Glaring gaps
Except Nagaland and Sikkim, all other States have notified rules for RERA, but the implementation of these provisions is slow. Meghalaya has notified the general rules for RERA, however, it has not established an authority or appointed a tribunal. The State does not even have an online portal running as on July 2020. On the other hand, Telangana has notified RERA rules, set up an online portal, and appointed an interim authority and tribunal. While interim authorities also handle the regulations of the real estate market, their efforts fall short of intended goals.
For Jammu and Kashmir and Ladakh, the establishment of RERA provisions are in progress. In the case of West Bengal, the State has enacted its own legislation, which has been challenged before the Supreme Court.
Of the total 36 States and UTs, 20 are yet to establish an appellate tribunal for real estate, which plays a significant role in the disposal of cases.
“While all the States and UTs are allowed to modify RERA regulations based on their own market dynamics, innovation is key for RERA to function better. For instance, Maharashtra’s success is in its fast-track dispute mechanism — conciliation forum,” said Samantak Das, Chief Economist, JLL India.
Politics of RERA
Although it is important to keep the portal running by providing home buyers easy access to information, many industry experts feel that the political environment is critical to the success of RERA.
On the commercial real estate front, while the market is dominated by organised players, establishment of REIT regulations has attracted greater interest from institutional investors. It has made commercial projects more viable in terms of returns for the investors. But many developers are yet to take a call on their respective REIT launch, given the uncertain times.
“There are about 300 million sqft of REIT-worthy assets in the market, but investors and developers are still trying to understand the trends that could emerge, in terms of rentals, escalation of rent amounts, and common annual maintenance charges. Once the air around this clears, we can see the REIT launches happening. But for now, they are on pause,” said JLL’s Das.