Often, more laws lead to greater red tape and their improper implementation defeats their very purpose. In the recent past, the government has unveiled several new regulations that affect the real estate market. For example, the Real Estate (Regulation and Development) Act (RERA) is one such big law that the realty sector is trying to cope with.
New rules have definitely impacted real estate players, maintains Amit Wadhwani, director of Sai Estate Consultants. “With new regulations, there are also fears of cost escalations, as clearances could take more time than usual. It will be difficult to expect all developers, brokers and even buyers, to adapt. Operating on multiple projects could also become a challenge, as the regulator would seek details of prior projects before sanctioning new ones. With a large number of non-delivered apartments in the market, companies would need to clear the backlog before launching new projects,” says Wadhwani.
Recent laws that will have a profound impact on the real estate market
- RERA: The RERA, which came into force recently, has laid down a rigid framework that will change the way the realty sector operates in India. It aims to enhance transparency, bring greater responsibility in the realty sector and set norms to protect the interests of all stakeholders.
- GST: The Goods and Services Tax (GST) will reduce the cascading effect of multiple taxes on the end-user and bring clarity, in terms of the services and goods that one is paying for and how much one pays. Nevertheless, it is likely to take 6-8 months for businesses to adapt to this new regime.
- Insolvency Act: The Insolvency and Bankruptcy Code is likely to promote better management of companies in India. There will be better fiscal regulation among companies, which will ensure that all the creditors are paid on time. The policy bestows considerable power on the legal system, to deal with stressed organisations.
- Benami Act: The Benami Transactions (Prohibition) Amendment Act, 2016, lays down stringent rules and sets up a regulatory system, to deal with disagreements arising from such dealings and charges heavy penalties on offenders. This is likely to make India an attractive investment hub.
Will the new laws make the market more difficult or easy for developers?
“With RERA in place, developers are observing a big transition. Authentic and genuine players will be happy with this new regulation and will survive, while small players will face difficulty in terms of finance, escrow and separate accounts,” explains Aniket Haware, managing director, Haware Builders.
Experts add that buyers in India’s property market have always been an anxious lot, due to dishonest developers and weak policies. However, the new laws are raising hopes again. The anticipation is that RERA will rid the system of many unreliable developers and give assurance to home buyers, as well as investors and help revitalise property sales. However, they also point out that the real estate authority, for example, continues to remain in the hands of the same people – i.e., retired officers who were part of the earlier system that was slowing down the work process. So, in spite of several new regulations, some of the old problems may persist, they caution.