Timely constructions in RERA Regime
Authored by Vivek Gadhe, Head-Construction (Affordable Housing), Rustomjee Group
There was a time, not too long ago when booking a home was like playing the lottery – if you took a chance with some new developer chances were that even a decade later you would still be waiting to move into your dream home. The real estate sector was hopelessly unregulated, (during second decade of 20th century with market size of $70 billion out of which 95% is the unregulated as % of the total market size), there were a lot of transactions happening in cash and in general the buyers and investors were dissatisfied with the general order of things. Other than a few trusted and reputed developers the realty sector was viewed as a risk. There was surge in fly by night realtors. And this is a sector which is the second largest employer in the country after agriculture.
RERA Comes to Town
The aim of introducing RERA was simple – protect the interests of home buyers. Instil a sense of confidence in investors in the sector. It was no surprise when some of the earliest projects to get registered under RERA were by those same reputed developers who had, as a matter of principle, been following the fair practices listed by RERA.
With RERA buyers were now assured that developers would use the funds cached with them for that particular project only. Proper planning and details of every stage of construction were available to buyers. RERA ushered in an era of full disclosure in the realty sector.
Keeping the Date
Perhaps the key benefit that buyers and especially end users have derived from RERA is that now they are given a definite date for when they would receive possession of their home. Delay in projects was mainly due to the diversion of funds by developers from one project to another. Now with RERA stipulating that 70% of all received funds have to be parked in separate reserve account called “escrow”. This ensures that funds are dedicated towards the completion of the project.
Moreover, RERA has incorporated a stiff fine of up to 10% of the project cost in case developers renege on the delivery date registered with RERA. Now, buyers have an authority they can appeal to when builders fail to keep their promises. Earlier, some developers would draw up skewed documents wherein the buyers would be imposed with a heavy fine/interest in case of delay in payment, but there was no reciprocal fine to be borne by the developer in delaying possession.
Finding a Loophole
Some developers are now adopting a different tack. Given that RERA is extremely strict in imposing the delivery date, they are putting in buffers when the projects are registered with RERA. Thus, a developer would give a buyer a certain date in the sale agreement but put in a date for a year later with RERA to give themselves a safety net as it were. The MahaRERA Chairman is considering making the sale agreement date as binding on developers and it remains to be seen if this will be implemented by the authority.
Another factor to consider is that with RERA developers focus first and foremost on giving possession of the homes as per the specified date. This also implies that the other deliverables like common areas, amenities etc would, in some cases, take a backseat and buyers would be moving in a completed apartment but not necessarily a completed project they had opted for.
The Key Factor
Yes, RERA has played an important role in bringing the real estate sector on track. The developers are able to get investors and funding. Buyers are considering under-construction projects as opposed to a few years earlier when only completed projects were seen as a sure bet.
Most of the Project Management techniques need to be implemented very thoroughly to get the project on track. Many of the projects are cost and time overrun which has an impact on project funding. All these factors together called as “Project Management”.
As a developer, given an emphasis to design and using them to articulate the structure into 3D models, helps in better understanding, visualisation and has proven very effective to execute the project on time.
To epitomise – from Project initiation to handover of the project ; from Project existence report to project closure report, every scarce resource need to be allocated with proper planning and delivering the project on time, ultimately a satisfied customer is the outcome of our deeds.