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What RERA timeline extension means for developers, homebuyers?

What RERA timeline extension means for developers, homebuyers?

 

The Finance Minister, Nirmala Sitharaman announced that due to the effect of COVID-19 pandemic, the time limit for the completion of real estate projects will be extended by up to six months. The Center is advising both states and union territories to treat the Pandemic as an ‘act of God’ and increase the project completion dates. Although, this will offer help for real estate developers in the execution of projects because no lawsuits may be filed against them, nor will they be liable to pay any fines. Homebuyers are not likely to receive any specific relief in the form of interest / EMI exemptions to buyers. The law safeguards their confidence in seeing their homes completed within a few months. With that directive, if and when provided by the particular states, all projects in those states will be extended. 

Effect on sector:

The lock down, placed on 25 March to curb the spread of corona virus, has a significant effect on the real real estate and building firms. Huge number of employees coming from villages in other states have relocated back when the lockout started. It will provide some extra space to ventures when they slowly resume activities after the lock down constraints have been relaxed. 

What are the penalties:

In real estate regulations, investors are subject to a penalty if they refuse to follow the building completion deadlines. They will have to pay a fee equivalent to 10% of the expense of the project if they do not report their current projects with the Real Estate Regulatory Authority (RERA). Likewise, homebuyers are often liable for not paying any payments owed to the builder. Regulators may be asked to extend the deadline given by real estate developers to complete the project so that they will not default on incurring fines. Likewise, homebuyers may even be given an option to compensate whatever balance is owed to the builder.

 
Extension:

According to Sitharaman, these steps would de-stress real estate developers and enable the execution of ventures such that homebuyers can receive booked houses with new deadlines. Developers asked for an extension of the RERA time limits and for Covid-19 to be included in the force majeure provision. The housing authority in Maharashtra has already given an extension of three months. The Government has declared liquidity support to non-bank borrowers by offering partial or absolute guarantees value of Rs 75.000 crore on investment in debt securities issued by these companies to enable them to generate capital. Non-banking finance companies, the major borrowers in the real estate market, have seen bad loans grow and are unable to collect money. Regulatory bodies in states including Maharashtra, Gujarat, Tamil Nadu, and Uttar Pradesh have provided both builders and customers an extension. Madhya Pradesh also extended the deadline by six months for the completion of listed projects to be finished after March 15. 

 

Benefits to builders:

These benefits will allow six months for the project registration and execution of projects. Due to lack of immediate regulatory corrective action under the RERA Act 2016, there is also a risk that certain real estate developments may be delayed leading to litigation, etc. This growth eventually contributes to the delays in the delivery of apartments to homebuyers who have spent their entire savings in their new home. A notable change is the acceptance by the developer community of expanding project execution targets and other regulatory compliances under RERA by six months. They will be able to deliver homes to the home buyers within the new time frame. 

 

Benefits to buyers:

The Government has declared that the extension of deadlines will safeguard the interest of customers when they get the house. Although, delayed by six months. Delay of only a few months is better than not having the home at all. Homebuyers will have to face further six months delay in delivery of the property. The consumer will have to face the extra burden of charging the rent for six months. Construction is related to the payment package for most customers. If there is no on-site construction activity for 3 months, there will be no claim for payment from the developer to the customer for that duration. Indirectly, the customer will get relaxation. Furthermore, the support given to the builders is just for the timetables of the project and not on the financial side. They will have to start meeting their borrowers financial commitments.

 

 

Weekly market update (11th May – 15th May)

Equity Right

Real estate sees investment growth in 2019

Real estate sees investment growth in 2019

 

Real estate market witnessed an increase by 27% in investment during the year 2019. This increase is due to the Real estate sector now being transparent in operation and money-making. Many foreign investors and domestic investors have a great interest and belief and have invested in this sector in hope of making profits. Also, many government policies played a key role in helping this sector escalate.

 

Real estate witnessed a record of $6 billion during the financial year 2019. Investment compared to last year was $4.76 billion which has now increased by 27% to reach a record high of $6 billion. Major investment was 10% in hotel, 40% in office and development sites by 41%. Cities with high investment rates are Bangalore, Mumbai, Delhi, Hyderabad, Ahmedabad, Kolkata, etc. There were many steps taken by Government to increase the liquidity of cash to create interest for the investors. Major contributors were foreign investors with 65%. On the other hand, domestic players were 35%. Hotels saw a 10% increase compared to 2018 report and development sites saw 5% growth compared to 2018. India is a hub for many developed countries searching land, warehousing, and office space. Quick urbanization looks good for this part. Interest for private properties has flooded because of expanding urbanization and rising family unit pay.

 

Real estate sees growth in investment in 2019

India is among the top 10 Real estate markets globally. Government allows 100% FDI inflow in this sector. They have also passed a scheme which states 60 million houses are to be built by 2022 where 40 million are in rural region and 20 million are in urban region. Government is aiming to build 100 smart cities which will help to reduce number of people migrating to urban areas. Relaxation in certain norms has helped to elevate this sector. Key drives to increase are easy finance, increase in population, rapid urbanization, increase in the income of people, increase in economy, growth in tourism and policy support by Government.

 

As of now, COVID-19 is affecting various sectors all over country due to lock-down. There is a 20% decline in Real estate. Due to low-income and decrease in spending power of people there will be a decline in sale. COVID-19 pandemic may have serious declining impact in the present year. Quick urbanization looks good for the part. As per the Government, the sector will witness a $1.3 trillion investment by 2025. The increasing young population of India will help in building education space. The healthcare space is expected to grow to $372 billion by 2022. With an increase in number of tourists, there will be increase in number of guest houses and service apartments. Also, increase in demand for hotels industry is expected to increase up to $15.3 million by 2025.

 

 

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