March ushered in a fresh lease of life for the Indian real-estate sector with the much awaited Real-Estate Regulatory Bill getting a nod from both Houses. The bill is based on three major foundation stones: Transparency, Accountability and Efficiency. The benefits of the bill will be revealed in a domino effect not only across the realty sector but the economy at large. From a bird´s eye view, it is quite evident that increased accountability will be positive for all across the value chain. For instance, with increased disclosures and focus on corporate governance after the establishment of SEBI, the scams in the stock market have reduced considerably compared to the early 1990s. Compulsory disclosures and registration ensure transparency, while taking responsibility in case of any unwarranted deviations in the process ensures accountability. Together, these elements infuse efficiency by discarding any kind of deception in prices. First, sales will happen on carpet area, which is a practice followed in developed countries such as Singapore, the UK, etc. Second, the escrow account will help curb diversion and misuse of funds, thus ruling out speculative practices. An important element of the bill is the redress mechanism. It envisages establishment of a fast-track dispute resolution mechanism for settlement of disputes through adjudicating officers and the Appellate Tribunal. For the redress of grievances, buyers can now approach consumer courts available at district level across the country instead of only the Regulatory Authorities proposed to be set up in capital cities. This reduces the cost of litigation and makes the process convenient for buyers. Huge impact on the residential market Based on our data, Urban Development Minister M Venkaiah Naidu said, ¨As per available information for 27 major cities including 15 capitals, 2,349 to 4,488 new housing projects were launched every year between 2011 and 2015. Thus, in these 27 cities during these past five years, a total of 17,526 projects were launched with a total investment value of Rs 13,69,820 crore.¨ Impact on economy The Indian economy opened up to the world about two decades ago and we want foreign funds to roll in. Thus, it becomes imperative that a global standard is maintained and transactions monitored by a regulator. Moreover, project delays are the biggest menace for Indian real estate and one of the key reasons for sky-high prices. As far as responsibility for delays is concerned, it lies both with the developer as well as government authorities. Thus, if we look at a broader aspect, delays on execution also have a negative bearing on India´s GDP. For our analysis, we have considered all the total supply across all the 27 cities under our coverage universe. About 34 per cent of this supply is over 12 months delayed. This estimated delay of residential projects amounts to 1.32 per cent of GDP (2014-15) at current prices. The construction and sale of an apartment, the root of the real-estate sector, has the capacity to catapult the growth of an entire ecosystem on its own. Once execution delays are considerably reduced, housing sales will receive a boost. The Indian economy will stand to benefit through this equation in a three dimensional way, as shown above: Only half the problem solved The bill not only protects consumer interest but recognises that faster approvals are also crucial for developers to prevent delays. Against this backdrop, regulatory authorities also aim to promote a single-window system of clearances for real-estate projects benefiting the sector and can now grade projects along with grading of promoters, besides ensuring the much desired digitisation of land records. However, the bill has a long way to go as far as faster sanctioning process is concerned. Thus, the problem is only half-solved. Nevertheless, with a vast universe under coverage, it can be expected that the bill will have far reaching positive effects on execution and accountability. A nation´s economy has its foundation in consumer confidence. The bill will be instrumental in alleviating the prevalent dwindling confidence and weak sentiment across the sector. With increased transparency, the real-estate sector will start to look up and attract increased funds from overseas. Without a proper regulatory mechanism in place, the government´s ambitious ´Housing for All´ policy will be unable to yield the desired results. The amendments are a step in the right direction, but it is imperative that they be implemented within the timeframe that the momentum is intact. The three dimensional way... 1 Increased sale of houses create ancillary demand. There will be automatic demand for furniture, consumer durables, fit-outs, automobiles, fibre optics and telecom companies. 2 This will spur job creation and expansion of industries giving a boost to commercial segment. Benefits of this will also trickle to retail realty as increased income implies enhanced purchasing power. 3 An upbeat economy with a functional regulatory mechanism will place India on a global footing and make it one of the most sought after destinations for international investors. About the author: Pankaj Kapoor, Founder and Managing Director of Liases Foras, is an expert particularly in the field of valuation, risk assessment and forecast of the price behaviour. .tg {border-collapse:collapse;border-spacing:0;} .tg td{font-family:Arial, sans-serif;font-size:14px;padding:10px 5px;border-style:solid;border-width:1px;overflow:hidden;word-break:normal;} .tg th{font-family:Arial, sans-serif;font-size:14px;font-weight:normal;padding:10px 5px;border-style:solid;border-width:1px;overflow:hidden;word-break:normal;} .tg .tg-9hbo{font-weight:bold;vertical-align:top} .tg .tg-amwm{font-weight:bold;text-align:center;vertical-align:top} .tg .tg-baqh{text-align:center;vertical-align:top} Transparency Accountability Efficiency Enterprise Details Approvals Layout plan- phase- wise. Development Work to be executed, proposed facilities. Details of Professionals and Real Estate Agents. Declarations of Title and encumbrances. No of units to be developed and their carpet area. ‘Likely period of time’ within which promoter undertakes to complete the project or phase thereof. Minimum 70% of realisation to bedeposited in separatebank account to cover the cost of construction. Builders will pay interest to home buyers for any default or delay sat the same rate they charge them. Builders will be liable for structural defect for upto five years. Timely completion will lead to reduced speculation and sales at justified price points. Deception in prices will go as stock will be sold at carpet area. In tune with practices in developed world. Diversion of funds or proceeds to different projects and other motives like land accumulation will be curbed. New launches across 27 cities .tg {border-collapse:collapse;border-spacing:0;} .tg td{font-family:Arial, sans-serif;font-size:14px;padding:10px 5px;border-style:solid;border-width:1px;overflow:hidden;word-break:normal;} .tg th{font-family:Arial, sans-serif;font-size:14px;font-weight:normal;padding:10px 5px;border-style:solid;border-width:1px;overflow:hidden;word-break:normal;} .tg .tg-9hbo{font-weight:bold;vertical-align:top} .tg .tg-baqh{text-align:center;vertical-align:top} .tg .tg-amwm{font-weight:bold;text-align:center;vertical-align:top} Calendar Year No of Projects Units Launched Value of Units Launched (Rs.crore) 2011 2,640 373,501 227,744 2012 3,705 455,114 280,538 2013 4,488 502,671 336,472 2014 4,344 513,688 302,487 2015 2,349 328,376 222,578 Total 17,526 2,173,350 1,369,820 Source: Liases Foras Cities covered: MMR (Mumbai Metropolitan Region), NCR (National Capital Region), Bengaluru, Chennai, Pune, Ahmedabad, Hyderabad, Surat, Kolkata, Chandigarh, Vadodara, Jaipur, Indore, Lucknow, Bhopal, Nagpur, Coimbatore, Nashik, Goa, Kochi, Mangalore, Thiruvananthapuram, Palghar, Boisar, Kanpur, Bhubaneswar, Rajkot, Patna. Statistics of Delays (total supply fi gures in mn sq ft) .tg {border-collapse:collapse;border-spacing:0;} .tg td{font-family:Arial, sans-serif;font-size:14px;padding:10px 5px;border-style:solid;border-width:1px;overflow:hidden;word-break:normal;} .tg th{font-family:Arial, sans-serif;font-size:14px;font-weight:normal;padding:10px 5px;border-style:solid;border-width:1px;overflow:hidden;word-break:normal;} .tg .tg-amwm{font-weight:bold;text-align:center;vertical-align:top} .tg .tg-9hbo{font-weight:bold;vertical-align:top} .tg .tg-baqh{text-align:center;vertical-align:top} Cities NIL Less than 12 Months 12-24 24-36 36-48 48-60 More than 60 Months Grand Total Launched in 1 year More than 1 year NCR 65 140 201 195 111 84 21 16 833 MMR 59 95 130 83 35 27 19 20 466 Bengaluru 73 129 108 67 14 8 8 2 409 Pune 44 48 102 45 12 5 2 2 260 Ahmedabad 33 52 73 33 7 3 0 0 202 Chennai 12 59 72 26 11 5 3 1 190 Hyderabad 23 17 57 25 17 6 9 13 168 Surat 20 39 32 6 1 0 0 0 98 Kolkata 11 25 30 12 9 5 0 0 92 Bhopal 8 32 29 11 1 0 0 0 81 Vadodara 14 28 23 4 0 0 0 0 69 Chandigarh 3 10 26 15 7 4 0 0 65 Jaipur 7 21 20 10 4 0 0 0 62 Other cities* 24 62 98 47 15 8 3 2 260 Grand Total 396 758 1,001 579 244 155 65 57 3,255 % 12% 23% 31% 18% 244 5% 2% 2% 100% Source: Liases Foras. *Lucknow, Indore, Nagpur, Nashik, Kochi, Bhubaneshwar, Coimbatore, Mangalore, Patna, Thiruvananthapuram, Goa, Kanpur. .tg {border-collapse:collapse;border-spacing:0;} .tg td{font-family:Arial, sans-serif;font-size:14px;padding:10px 5px;border-style:solid;border-width:1px;overflow:hidden;word-break:normal;} .tg th{font-family:Arial, sans-serif;font-size:14px;font-weight:normal;padding:10px 5px;border-style:solid;border-width:1px;overflow:hidden;word-break:normal;} .tg .tg-amwm{font-weight:bold;text-align:center;vertical-align:top} Total area delayed more than 12 months 1,100 (mn sq ft) Cost to Economy (Rs.crore)* 165,064 Proportion of GDP (2014-15) at current prices** 1.32% * Cost to Economy is estimated at construction and other cost of Rs.1,500 per sq ft **Estimated GDP 2014-15, at current prices is Rs.125.41 lakh crore (Source: Central Statistics Office) Source: Liases Foras To share your views on the Real Estate Bill, write in at feedback@constructionworld.in