Will RERA impact real estate prices?

India is witnessing massive change in regulatory laws pertaining to each sector of industry. Of course real estate could not be left behind and hence we have had the introduction of RERA. It is a newly proposed act that will affect real estate developers in Mumbai, and all over the country, from May 1, 2017. RERA or the Real Estate Regulation and Development Act, 2016 has been formed to seamlessly cover and regulate all residential as well as commercial projects in each state of the nation.

 So why was RERA passed?

Real estate is a sector notorious for unethical practices. RERA is India’s attempt at curbing illegal practices and safeguarding the interest of consumers by promoting fair play in transactions and ensuring that projects are executed as per their designated time line.

What do top real estate developers in Mumbai and other cities have to do?

1. Registration:
RERA has made it a mandate for all projects – residential and commercial – where the land is above 500 sq. mt. or 8 apartments to be registered under the act. Registration is to ensure transparency in marketing and timely execution of the project. In the case of ongoing projects that have not received a certification of completion, registration is to be sought within 3 months. Failure to register will attract a penalty of up to 10 percent of the project cost or 3 years’ imprisonment.

2. The act facilitates transparency by ensuring unaccounted money does not enter the system. For the time being, 70 percent of money is to be deposited into banks through cheques.

3. All advertising, marketing, selling or purchasing of papers will have to, going forward, reflect the registration number available on the certificate.

While RERA looks set to clean out the industry and bring best practices to the forefront, the important question that begs to be asked is, will it affect real estate prices?

The answer isn’t so simple. While stricter compliance and transparency may push the prices up for newly launched projects the fact that there is existing inventory supply cannot be ignored and this very aspect might keeps prices steady. Other aspects such as projects now being sold on carpet area, may bring about a fluctuation. However, with the introduction of RERA, it will be awhile before new projects get launched and existing inventory is exhausted. And so the best real estate companies in Mumbai and other cities can breathe easy knowing that prices are not expected to be affected any time soon.