Real estate sector’s expectations: Uniformity in RERA

The Indian real estate sector has witnessed high growth in recent times with the rise in demand for office as well as residential spaces. The government has set the stage for Indian real estate to flourish in the long-term by introducing landmark reforms such as RERA & GST, driving a complete transformation of the unorganised and opaque real estate sector into a regulated, transparent, affordable and consumer-friendly asset class.

The government’s “Housing for All” scheme by 2022 for the affordable housing sector has opened interest in the low- and mid-income segments like never before. The low-interest rate loans, the special interest rate for women, PMAY and other such schemes have opened multiple channels for people to buy their dream home.

The RERA Act has promoted fair play in real estate transactions and has encouraged timely execution of projects, ensuring the accountability of all stakeholders. It has reduced delays in the completion of projects that have boosted homebuyers’ confidence. With the implementation of GST, we have been able to further rationalise the tax structure for our customers, leading to an increase in consumer confidence. Overall, the unified tax regime is a positive sentiment booster for the industry, as it has revived both buyer and investor interest by bringing in more transparency, which has led to an end user driven market.

The Government of India has introduced every possible initiative to boost the infrastructure sector, like an announcement in the Union Budget 2019-20 where a massive push has been given to the infrastructure sector by allocating Rs 4.56 lakh crore ($ 63.20 billion) for the sector. With rapid economic growth and developmental strides taken by the Government in the last five years, the foundation of infrastructure transformation has been laid which will continue to be beneficial for the real estate industry. It is a fact that the demand for homebuyers primarily depends on available infrastructure. It includes ease of accessibility as well as the availability of essential utility services along with social infrastructures, such as access to schools, shopping, healthcare facilities, entertainment, etc.

The Indian real estate market is expected to jump over five-fold to $ 650 billion by 2040 and will be the second largest employment generator contributing almost 13% of the country’s GDP. In the backdrop of all these developments and steps in the right direction, it is imperative to address some of the gaps with a few focus areas comprising of all stakeholders:

Uniformity in RERA

The implementation of the RERA Act has varied from state to state, depending on the pro-activeness of the State Governments abiding with Central RERA norms and meeting the timelines. Maharashtra has implemented RERA in its true sense, and Madhya Pradesh is catching up now, but implementation is slow in other states. Karnataka was one of the first few states to promulgate rules and establish an online portal for registering projects and filing complaints. Successful implementation of RERA would also include accountability from all stakeholders concerned.

Boost to infrastructure

Public participation is key to the growth of infrastructure for the future. The Infrastructure maintenance cost if shared with the public, would ease the burden on the Government. However, the willingness to pay (by the public) comes only when the common man sees substantial benefits. It is pertinent that the government (local/state/centre) creates awareness among the masses on the need for better infrastructure, even if it means the Pay to use model.

Today, we also see many private companies coming forward to improve Infrastructure in cities. Partnering with such companies that contribute to the GDP of the country is a good step towards public Private Participation resulting in the rapid growth of Infrastructure in Tier I and Tier II cities.

Easing the liquidity crisis

The recent NBFC crisis has taken a toll on the real-estate market. For long NBFCs have been the preferred source of funding to the realty sector. With banks tightening lending to realty projects and the pressures of RERA, NBFCs have been the natural choice for most realty companies in India. The RBI’s move against the NBFCs has hit both developers and the potential homebuyers. Also, the mortgage penetration rate in India versus other key markets like China and the US is very low as compared to global standards. The government should ease off the liquidity crunch for making funds more accessible to homebuyers and consumers. Low cost financing will significantly boost the Indian real estate sector.

Single-window clearance

The delay in granting approvals for various real estate and infrastructure projects is a big hindrance for the overall development of the economy. Developers need to seek on an average of 25 approvals for each project, which increases project timelines by 18–30 months, impacts delivery and the cost significantly. It would be very beneficial to the sector if the Government puts together a simplified online approval process with a single window clearance to speed up the process and reduce the red-tapism.

Digital transformation

Despite dealing in one of the most valuable asset classes in the world, the real estate industry largely relies on outdated real estate recording systems requiring paper-based filings with the local government offices. The administrative burdens, inaccuracies and security issues raised by such systems are well known. Both government and private parties need to implement the key attributes of blockchain technology to modernise real property conveyance and improve processes for recording deeds and other related instruments. This would result in greater efficiency due to digitisation, accurate record of ownership that updates in real time, tamper-proof and disaster-resistant decentralised documentation. Adoption of technology will increase transparency and help boost the confidence of global investors in the Indian real estate sector.

Steps to control artificial price hike

Today, the entire construction industry is blighted by rampant fluctuation in the prices of raw materials – cement, steel, and sand, which has impacted the growth of the entire construction industry. To eliminate this problem, the government must take draconian measures against hoarders, black marketers, and the sand mafia. There should be a robust government mechanism, which can address such issues, or else cartels will prove detrimental to the future of the construction sector.

Granting industry status

The much awaited “Industry status” for real estate would make a huge difference to the sector in multiple ways. It will allow access to institutional credit which in turn will help in cutting the developer’s borrowing costs. The industry status will also simplify the approval process, attract equity investment, improve transparency among other large impetus, providing measures to the booming real estate sector in the country.

(The writer is President, Residential Business, Embassy Group)