The Real Estate Bill, passed by both Houses of Parliament earlier this month, takes within its ambit many factors, including development as well as redevelopment and therefore, paves the way for a smooth road ahead. USIBC's Policy Manager, Hemal Shah spoke to Dr. Samantak Das, Chief Economist & National Director of Research at Knight Frank India about the implications of the bill, impact on developers and requirement for further clarifications on the rules of the road. Excerpts from the interview below:
USIBC: What is the macro level impact of the Real Estate Bill?
Dr. Das: The provisions in the Bill will make the process of home-buying much easier for homebuyers and they will get the much required protection in the transaction. At a macro level, these provisions will have positive repercussions on the entire real estate sector and will benefit all the stakeholders of the industry. Currently, residential sector in India is reeling under tremendous pressure. The sales in major cities have halved during the last 3 to 4 years and prices have remained more or less stagnant at a substantially high level. The major reasons for drop in sales may be attributed to price affordability factor of consumers and their lack of confidence on completion of projects by developers. The need of the hour for the sector is to bring back the confidence of customers so that sales volume increases. The Bill is expected to address this requirement by bringing in the required transparency in the system and reducing the information asymmetry between seller and buyer. Additionally, we expect greater institutional participation in flow of funds at the back of greater transparency and presence of a regulator. In a nutshell, the consumers can take prudent and confident decision on home purchases and developers will have larger flow of funds at competitive prices. On the pricing front, we believe that the Indian real estate sector’s move towards becoming a more ‘perfect market’ may result in rationalisation of pricing in the medium to long term. Telecom sector in India has gone through a similar experience in the past.
USIBC: The Bill does not directly bring approval sanctioning authorities on the anvil. How will developers address permit delays?
Dr. Das: The two pillars through which the Government seeks to bring greater efficiencies in the sector is the Regulator and the single window clearance. The Regulator will be in place, a year after the Act comes into force, but if systems are not in place for single window clearance, from the local body to the central level, this will create operational challenges for developers. However, the Central Government is taking initiatives and sensitising the State Governments to bring in the required changes in the approval procedures.
USIBC: Does the Bill provide clarity on retrospective effects for developers?
Dr. Das: Any project that does not have the completion certificate will have to be registered under RERA. This aspect has been made clear in the Bill. However, clarity is required pertaining to certain issues like the relevance of agreement for sale of units/flats that are sold before the registration of the under-construction projects with RERA. The Bill will evolve over time and I am sure the required clarifications will be made in the near future.