JOIN USThe Real Estate (Regulation and Development) Act was enforced in Karnataka a month ago. Ashish R Puravankara, Managing Director, Puravankara Limited and President of Confederation of Real Estate Developers Association of India, Karnataka, explains the impact of new RERA on the industry and consumer to Mahesh Kulkarni of DH. Edited excerpts:
How has been the implementation of RERA in Karnataka?
In terms of implementation, the website was set up and we had just a few days to upload information. All our projects have been successfully registered. There has been no issue. That’s the feedback with other developers. Now, we are waiting for the final registrations.
How many properties registered in Bengaluru?
The exact official data is yet to come. According to information available with us, about 800 to 1,000 projects have been registered under RERA. The builders are free to register any new project. However, for those, who have not done registration of their ongoing project, we are holding an interative meeting with members of CREDAI next week to assess the situation and educate the members on registrations. The government authorities are willing to join hands with us to educate our members as well as non-CREDAI builders on how to go about registering their properties.
What is the penalty for not registering?
The exact penalty is still not fixed by the government. But, it will be about 10% of the project cost. To begin with, the government authorities will issue the show cause notice. It will be a push mechanism initially. The authorities are proactive and they want to hold conferences to educate builders and clarify their doubts. In the initial days, the government is pushing all builders to register. The intention is to get all of them fall in line.
Do you see any improvement in buyers’ sentiment?
Housing is a necessity. We have been seeing purchases happening over the last 70 years. The RERA will fasten the decision making process. The question of whether a builder and a project is genuine will be answered now. There is no elbow room for a builder to violate rules and this helps in making a decision faster for the buyer.
How do you see the impact of RERA on the real estate industry?
For CREDAI members, I don’t see any large scale impact. We are self regulating ourselves. All our members have been following the rules and by-laws. We have a dispute redressal forum and the customers are free to get their issues resolved. But, there are huge sections of developers outside the association, some of them follow rules and some don’t.
However, fly-by-night operators and unorganised players will vanish from the industry. With more transparency coming into the industry, there will be scope for foreign institutional investors to invest in India’s real estate projects. We, at Puravankara, are in talks with several private equity players to invest in our upcoming projects.
Do you see any impact on the prices of properties?
With RERA in place, the cost of construction will go up, as builders will have to ensure warranty for five years. As 70% of capital is locked in an escrow account, the cost of funds will go up for builders and will result in amount of supply and launches coming down. All these factors will result in price rise, because unorganised players will be wiped out from the market. I am clear prices will go up by 3-5% as supply goes down over the next three quarters.
Do you see any supply constraints in the housing market?
I believe, those who violate RERA will be wiped out of the market. Builders will need to keep 70% of all collections in an escrow account will suck out liquidity, which was earlier used for business growth. As a result, supply will come down and prices will definitely go up. This will not impact the business because the number of buyers will still remain same even though the number of launches will come down. The market shares of organised players will go up with the unorganised players getting eliminated.
How is the demand for residential units in Bengaluru?
The demand is very stable in Bengaluru over the last one year. We expect to see about 10-15% higher sales this year. It all depends on the new launches. During the first quarter of the current financial year, we have seen about 10% growth in sales.
As sanctions are getting delayed, the number of new launches have come down in the first quarter. We expect good number of new launches during the third quarter of this year. In terms of sales, minimum of 15% growth can be expected during this year. The RERA will ensure transparency and the accurate data on completion and launch of units will henceforth emerge.
How many new launches Puravankara is planning?
We are launching many new projects with a combined area of about 12 million sq feet across Puravankara and Provident Housing over the next three to four quarters. Currently, we have about 24 million sq ft area under development.
Some are nearing completion and we will be completing and handing over about 3 million sq ft.