Delayed implementation of RERA will hit Developers’ FY18 performance: ICRA
According to the credit rating agency ICRA, the delayed implementation of the Real Estate (Regulation and Development) Act, 2016 and transition to this new regulatory framework is expected to impact the operational performance of real estate developers during financial year 2017-18. The provisions of the Act will also significantly impact developers’ financial profile as it will raise their working capital requirements and increase reliance on equity or debt financing, according to the rating agency.
K. Ravichandran, Senior Vice President and Group Head, ICRA said, “The current transition period of RERA implementation is expected to be challenging for developers as they need to realign their business operations to comply with the new regulations.” He also expects the constraints imposed by the Act to adversely impact the business model of unorganized developers and to bring some level of consolidation in the industry.
However, the agency also expects RERA to raise the confidence of buyers and improve demand prospects over the long term. He said, “This will benefit larger developers who have the resources and financial flexibility to withstand the near term challenges and scale up execution levels as required.”