Unlearning (Part 1) – RERA and its unstated challenges

The last couple of months have given the industry a triple whammy in the form of three game-changing paradigms – i.e., the introduction of the “Real Estate Regulation Act” (RERA), the introduction of the “GST regime” and the third more specific to Bangalore – the draft “Zonal Regulation Byelaws” proposed to be notified by the Government. It’s a time to unlearn, unlearn, go back to the drawing board and reinvent oneself as the industry function in  the way we know and understand it, is about to be changed (quite) drastically.

As thousands of square feet have cascaded into millions of square feet in this burgeoning metropolis, what do these changes herald for the real estate players?

A much anticipated RERA Act will give a sense of relief to the customer, but also from an ethical developer’s perspective nullify the advantage that an unscrupulous developer had over it in terms of overleveraging on deviations to building unauthorised square footage. We should hopefully see the financing and the compliances tightening their grip on unauthorised development.

Looking at the breakdown in the life of a project the basic grouse of the development community has been the long gestation of the approval process, while the RERA Act has closed the loopholes in the delivery and construction process, the authorities need to work on the process of approvals and catalyse the infusion of openness on the construction cycle to the approval process as well

The myriad interpretations of the development and revenue rules and the differences in interpretations at different times is a bane which hinders seamless development. There has to be an un-ambiguous and clear process of clearances which will pave the way for more development scope of the city.

RERA gives the customer teeth and will clean up the sector where the financial discipline needed will be mandatory given the rules of financial propriety to use the funds garnered for the property to develop the property itself

A long standing grouse of the developer community that needs to be addressed is availability of cheap and easy access to funds. Funding is still at a far from desired level as the rates of funding follow a paradigm of banking – i.e., the banker lends you an umbrella in good times, but when it rains – demands it back. A relook at funding patterns and availability of funds is necessary to propel the dream of housing for millions into reality. REIT’s for commercial asset development will finally see light of day freeing up cash flows for developers. There has to be a huge inflow of funds for the residential sector as well

A related aspect and probably the most important – is quality. Very honestly if you take the branding off a project, it is often difficult to say who the developer is! The delivery challenges are high and with the growth in volumes, the standards of quality afforded are low. Bangalore is the most competitive of markets pan India and there has to be more conscious efforts to provide a snag free product. With newer technologies being adopted and adapted -the promise to deliver has to be composite.

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