It's time to decode the after-effects of RERA Act

It's time to decode the after-effects of RERA Act

The launch of the Real Estate (Regulation & Development) Act ushered in changes in the sector of real estate after it was brought to life on May 1, 2016. There are about 2,000 small to large builders in Bengaluru alone. As this ground-breaking Act is making waves throughout the real estate sector, Commonfloor gauged the sentiment of the builder community in Bengaluru and the expectations of the developers with an in-depth survey. With the opinions of 100 builders of different tiers in Bengaluru, this survey gives an understanding of the Act's impact on the builder community.

From the sample segment of builders, 20% of the builders ran a small company consisting of 10 or fewer members. At the same time, 35% owned medium-sized firms with a strength of 10 to 40 employees. The remaining 45% belonged to the large entities, having an employee strength of more than 40 members.

Understanding the target audience highlighted that mid-premium housing is the major target for the builders. For 22% of the builders, the target audience consists of home-buyers looking for affordable housing, whereas luxury housing took up the interest of 25% builders. However, 53% of the builders opted to cater to the mid-premium housing tier.

 The survey addresses the registration aspects of the RERA on builders or developers and other major effects of the act on the real estate market.

Here are some pointers...

Ease of RERA registration

With the introduction of RERA, developers are not permitted to market the project without registering it with the regulatory authority, and the registration can be revoked in case of violations. When enquired about the ease of registration under the RERA Act, 55% of the builders responded that they found it easy, whereas 32% found it difficult to do. However, 13% of the builders could not understand the procedure.

The sampled developer audience, when posed with the question of having registered with RERA Act, responded in affirmation. The majority 80% of the builders have already registered with the Act. However, 20% have not registered yet.  

Empanelment of brokers

With the requirement for brokers and real estate agents to register as well, the empanelment could seem as a worry for the builders. On being enquired about validating this query, the builders gave mixed responses. Where 45% of the builders did not think that this would be a cause of worry, 27% expressed their concern. However, another 28% were not sure about how it would play out.

A shift in focus

With the implications of RERA legislations, it is mandatory that the builders disclose every detail of the project on the website of the authority. This begs the question of what would attract more focus - new project launches or ready-to-move sales? Where 52% of the builders agreed to shift their focus to ready-to-move sales, 20% stuck to their focus on new project launches. At the same time, 28% were not sure as it might be too early to jump ship.

Will investor's sentiment return?

The implementation of RERA casts a wide shadow on the investment arc of the real estate market. When enquired about whether investor's sentiment would return after the Act's implementation, 60% of the builders were affirmative about it. While 33% were unsure about the follow-through, 7% denied that the sentiment would make a return

The real impact

About 77% of the developers believe that RERA would help the real estate market, while a 5% disagree. 18% of the builders were unsure as to what kind of an impact the Act will have. One thing can be understood with surety, that the market would not remain the same.

Amidst the utter confusion as to how the real estate market would progress when faced with implications, legislation and restrictions of the RERA Act, the sample audience opinions varied.

While 43% builders favoured an exponential growth, another 35% predicted that it would remain the same. However, 22% suggested that the market would see a decline.

 With the market looking at legislations regarding registration of ongoing projects to penalties for noncompliance, the Act ensures more liability of the builders and developers towards the buyers.

 (Courtesy: Commonfloor.com)

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