RERA may push up construction costs by 10 per cent

The Real Estate (Regulation and Development) Act, which is expected to come into force from May 1, 2017, may increase the compliance and finance costs for developers and push up construction costs by 10 per cent

The Real Estate (Regulation and Development) Act (RERA), aimed at offering protection to home buyers, is expected to have a negative impact on home price.

“There will be an increase in price of homes, due to higher compliance and finance cost for the builders after RERA is in force. Initially, we expect a 10 per cent jump in construction costs for builders, which will get passed on to the buyers,” real estate body CREDAI Bengal’s president, Nandu Belani said.

He was speaking on the sidelines of an interactive session on RERA in association with BCCI and MACJ-A Buyers Choice Home Inspection. RERA, likely to come into force from May 1, 2017, mandates builders to keep 70 per cent of the collection from sales proceeds in an escrow account, leaving less flexibility for builders to utilise the proceeds in different projects. Consequently, builders say the need for capital would go up, due to the RERA’s provisons. However, builders also welcomed RERA, saying it will eliminate fly-by-night operators and induce credibility.

See also: The RERA effect: Indian real estate waits to inhale

A major concern bothering the realtors is about the existing projects and they have sought some respite on applicability of RERA, at least for the projects at different levels of completion.

Emami Infrastructure Ltd’s director and CEO, Girja Choudhary said, “We are concerned about the RERA applicability on ongoing projects. It would be good, if states adopt what the Uttar Pradesh government has notified, about some exemptions for ongoing projects.” Belani added that in the transition period, new home project launches would definitely reduce. MACJ – A Buyer’s Choice Home Inspections’ director and CEO, Mahendra Sureka, hoped that in the next two years home inspectors would also be a part of the regulatory framework.

 

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