The deadline of July 31, 2017 for notifying RERA rules ended with most of my predictions coming true. Unfortunate but expected. Here is a quick summary of the key developments by the deadline date and their impact going forward.
1. Completion Certificates (CC): There was a rush by developers for securing CC with the hope that some of their projects can get exempted. We anticipated that many incomplete projects might join the queue and rejection of 14 applications by Noida Authority confirmed the same. Ghaziabad authority rejected 24 applications. We expect and hope that other statutory bodies will follow suite. However, Chennai Metropolitan Development Authority (CMDA) took an opposite stand by exempting 266 ongoing projects that had filed for a CC.
2. Construction focus: Most developers across India have initiated project completions with a serious intent. This is being done through internal accruals or support from financial institutions. Uptick in the disbursement of institutional capital in first half of 2017 supports this. In the first six months of 2017, PE/ VC was USD 11.2 billion and real estate was overshadowed only by Financial Services and Technology. One study estimates that 29 deals of USD 2.5 billion took place in the same tenure.
3. Deadline extension: We expected many states to miss the deadline. Either due to delayed process or general bureaucratic lethargy. Out of the 35 states and union territories (UT) (excluding J&K and states from the north-east), only 4 states had formed permanent regulators which are: Maharashtra, Punjab, Gujarat and MP. While 23 states have notified the rules and 13 states and 6 UTs have formed an interim regulator, we are still months away from RERA being fully operational across India.
4. Dilution of State Rules: I had mentioned several times while analysing the Act that the state level rules are key to implementing this path-breaking act. If these rules are weak, old problems will persist. We have already noticed consumer uproar regarding such potential changes. Homebuyers in Noida are protesting against provisions in rules which they claim support the developers. There were over 1000+ suggestion for the rules in Haryana. We expect and hope this battle will continue throughout 2017.
5. Last minute rush: As is human nature and due to lack of clarity on several counts, we expected there would be last minute rush for registration. In Karnataka 990 projects were registered on the last day. Rajasthan received 276 applications on the last day. Same was case in Tamil Nadu. It will now take some time before these are reviewed, approved and registered.
6. It will take time: Such a larger scale change in regulatory regime will be difficult to execute overnight. Even with the best of intents we expected this to take another six months before a clearer picture emerges. For example about 400 application were pending on 1st August 2017 with the Haryana Government awaiting registration. Only 28 had been approved till then. This story is expected to repeat in most states.
7. Maha-RERA: Maybe not in all states. Over 1500 developers have already updated on the Maharashtra RERA (Maha-RERA) website taking the total number of projects to over 4600. In the near future this figure is expected to reach 9000. In several ways, Maha-RERA has become the gold-standard with respect to its backbone/ infrastructure. Feedback from developer and consumer has been generally very positive. In fact Maha-RERA has already imposed fines on about 480 projects. Pune authority is planning to report about 25 percent unregistered projects.
Some of the other forecasts that we had made haven’t come true, yet. We were unsure of how the Government bodies which undertake construction/ development will reach to the Act. Several Development Authorities and House Boards undertake residential development. While comprehensive data is not available yet, we can safely assume that most of these Government bodies wouldn’t have registered so far.
Developers will continue to struggle to meet the demands of the new business environment.
Consumers will and should remain cautious regarding the state level rules. Both Noida and Gurgaon homebuyers have already moved court regarding their respective rules.
Sales and marketing of projects will remain subdued. RE(RD)A, GST, demonetisation and lack of economic activity at ground level will continue to keep the buyer and investor sentiment negative.
The real estate supplements/ classifieds in newspapers across India will continue to be wafer thin for a larger part of 2017.[“Source-moneycontrol”]