Will the RERA Impact on Real Estate Affect the Home Buying in 2018?

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Will the RERA Impact on Real Estate Affect the Home Buying in 2018?

The Real Estate (Regulation and Development) Act, 2016 (RERA) was introduced in 2016 and it became applicable from May 1, 2017. However, its potential has not yet been fully ascertained due to uncertainties precipitated by other factors such as demonetization and GST (Goods & Services Tax). Nonetheless, as the negative effects of demonetization are fading and with GST becoming stable, a clearer picture has started to emerge. Demonetization had adversely affected the realty market last year, but in 2018, RERA is expected to take center stage and give realty a positive push. One of the primary beneficiaries is likely to be the residential real estate sector. Let’s take a look at how RERA’s impact on real estate will affect home buying in 2018.


Increased consumer confidence:

Prior to RERA, buying a home was fraught with various risks such as substandard quality of construction, unapproved design changes, project delays, etc. Due to these risks, many people used to be sceptical about buying a home. Legal options were available to homebuyers, but not many wanted to pursue long-drawn court cases. RERA is proving to be a game changer since aggrieved homebuyers can directly approach RERA authorities with their complaints. RERA has provided a dedicated mechanism to resolve homebuyers’ complaints, which has boosted consumer confidence. This, in turn, is expected to increase the demand for homes in 2018. Fence sitters, who were following the wait and watch policy till now, are expected to finalize their decision to invest in their dream home.


Reduced financial burden:

Prior to RERA, project delays were widespread in the residential real estate sector. As a result, homebuyers had to bear the burden of paying rent and home loan EMIs for several years. This acted as a disincentive for many prospective homebuyers. RERA has changed this scenario, as it has made it compulsory for builders to mention the date of completion and possession in the sale agreement. Builders are also required to mention the rate of interest payable to homebuyers in case of project delays. RERA also treats project delays as an offence and has the provision for penalizing builders with fine and imprisonment of up to three years. These rules have favoured homebuyers, as they can now expect to get possession of their home in time. They do not have to bear the burden of paying rent and home loan EMIs for extended periods. People who were concerned by increased financial burden earlier can look forward to buying their homes in 2018.


Level-playing field:

RERA has provided a level-playing field to developers, irrespective of their size and scale of operations. Earlier, homebuyers used to run after reputed builders, but with RERA, they can expect to buy with confidence from any RERA-registered builder. By creating a level-playing field, RERA has provided equal opportunities to both small and large builders. This will promote healthy competition in the market, which is expected to keep property prices in check. Affordability will give the right motivation to consumers to purchase their homes in 2018.


No fear of fly-by-night operators:

RERA has started cleansing the realty sector and unscrupulous builders are on their way out. RERA registration is mandatory for all projects that come under the specified norms, so the risk of getting duped has been reduced significantly. Real estate agents are also required to register under RERA, something that has made it extremely difficult to cheat homebuyers. Moreover, builders are barred from publishing any advertisement until the project has been registered with RERA. Homebuyers can verify project and agent RERA registration on respective state RERA website to ensure that they are dealing with the right people. With reduced risk of being duped, home buying is expected to pick-up pace in 2018.


Clean capital at reasonable rates:

With increased transparency and credibility brought about by RERA, builders can now hope to get access to clean capital at competitive interest rates. Earlier, many builders used to borrow funds from unspecified sources at exorbitant interest rates. This used to increase their development costs, which was eventually passed on to home buyers. With RERA making it possible for builders to access clean capital at reasonable rates, property prices are expected to stabilize. This also implies that builders won’t have to compromise on quality to survive in the market. Affordable property prices and good construction quality will provide the right motivation to home buyers.

The above benefits will certainly be there in 2018 and beyond, but just like everything else, RERA also has some drawbacks. For example, the cost of compliance has increased after RERA, which may create challenges for small builders. Also, the threat of punishment for project delays may force builders to play it safe by extending the completion deadline, as mentioned in the sale agreement. There are other issues too and it appears that builders will have to make some adjustments to align with RERA. However, it should not be a major problem, as long as builders can keep the sales ticking. And looking at market conditions and consumer sentiments, it’s likely that home sales will increase in 2018.


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