Move will indirectly benefit homebuyers as property rates will see a downfall, and discipline unscrupulous developers
With an aim to regulate the real estate sector, the Real Estate and Regulatory Authority (RERA) Act was brought into effect on May 1, and homebuyers may benefit further as a decline in land prices is likely.
According to Maharashtra Chambers of Housing Industry(MCHI) members, land is a major input cost for residential projects and currently it is being sold at an exorbitant rate. "We spend more than 50 per cent of the project cost on buying land. Most of the local land owners demand the cost in cash that increases our total project. Once the land prices come down, property prices will automatically fall," said Manohar Shroff, vice chairman of MCHI, Navi Mumbai.
Shroff said that due to the RERA effect, developers have to first acquire documents for land, submit the project file and then get intimation of disapproval (IOD) and subsequently the commencement certificate. "Besides, developers will not put one project amount to another project. It is mandatory for him to open an escrow account and keep at least 70 per cent amount in this account. So that the undertaken project will not face a cash crunch.
Moreover, the project will also be completed as per the given schedule," Shorff added.
Another developer said that due to RERA, the fly-by-night developers will vanish. "These new norms will bring some discipline. Developers can no longer take the buyers on a long ride. There is no scope for unscrupulous developers now. As a result, there will be no rush for buying land. As a result, the land prices will also come in control. This will depend on the demand and supply," said Pankaj Kapoor, managing director at Liases Foras, the property research firm.
Kapoor added that the current property prices are highly overrated. "The inflated land and the property prices has to come down. The property market should be end-user driven. Investors will no more make money in a short period of time. The market will slowly get streamlined and regulated," Kapoor said.
Sources also said that as a result of RERA, most of the new projects will be launched at affordable rates.
Analysis
Land is a major factor in deciding property rates. The RERA act is a game changer in the real estate and housing sector that will discipline unscrupulous developers who were working as per their whims and fancies.
As a result, land buying activities will be also be controlled and disciplined. Developers will now have to follow the guidelines or be ready to face the music.
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