Aiming to boost investments in the real estate sector and create a more transparent environment for property buyers, RERA and GST have been benefiting the organized players post their implementation.
According to the Real Estate Regulation Act that came into effect in 2017, it is mandatory for all the proposed projects exceeding an area of 500 sq. mt. to be registered with the respective state RERA. This regulation benefitted the organized players while making it difficult for smaller players to do regulatory arbitrage.
While the regulation act is fully implemented in Maharashtra, it is facing troubles in other states. However, these problems are expected to resolve in the coming years. Samantak Das, Executive Director and Head of Research, Real Estate Intelligence Services, JLL India says, “Once other states also implement RERA the way Maharashtra has done, there will be a sea change in sentiment towards real estate.”
Godrej properties and Mahindra Lifespace Developers are among the strong real estate players that are likely to benefit from the expected consolidation. However, upside potential for the stock market has already factored this in and is not concluded to be as much but mid-cap companies like Brigade Enterprises are still citing at reasonable estimates.
There have been multiple positive impacts of RERA on the real estate industry:
- Minimization of Fraudulent Activities
There are many people who take advantage of those who are not well-versed with the real estate schemes. With the introduction of RERA, this has been reduced to a great degree considering the fact that every dealer needs to be registered and a RERA number needs to be displayed before the deal is initiated.
- Maintaining a Reserve Account
Buyers could suffer under the false commitments of getting their homes at a specified date with the action of re-directing funds for one project to another. RERA act has changed this by mandating the builders to reserve 70% of the project amount into a special reserve account.
- A standard sale agreement
Waiving the full liability from either one of the parties, the RERA act has given equal power to both the buyers and sellers. From now on, a standard model will be made and entered into by both parties equally.
- Return of the investor’s confidence
In the long run, it is likely that an organization will help the sector in a big way. With restoration of the investor’s confidence, long-term capital inflow will also be seen along with the revival of various other sectors.
“In addition to the large unorganized sector (around 90%), valuations of strong listed real estate players are also at reasonable levels now,” says Anil Sarin, CIO -Equities, Centrum Broking.