The Real Estate Regulation and Development Act (RERA) has, since its enforcement, significantly reduced the average time taken for construction up to the first floor slab to six months, as per a report by Liases Foras.
Data for 41 cities shows the average time taken to complete construction up to the first floor from the launch of a housing/real estate project has dropped since the implementation of RERA.
The report, titled 'RERA Induces Faster Construction and Economic Growth' found that before 2016, the average time taken to complete up to the first floor of the project launch used to be 21 months.
Among tier-I cities, Mumbai Metropolitan Region witnessed the maximum drop (of 63 percent) in the median time frame (from 15 months to five months); while Chennai witnessed minimum drop (that being 27 percent) from 10 months to seven months, between 2016 and 2018. In NCR, the average time came down to eight months from 17 months.
The report also notes that the floor space construction has increased in the last three years. Data from top-8 cities shows that the incremental floor space construction has increased by 88 percent from 2016 and 235 percent from 2014.
Builders have also increased the pace of construction in many projects to avoid registering them under RERA leading to a sudden jump in floor space construction in 2017, says the report.
RERA came into effect from May 1, 2017 and Maharashtra was the first state to implement it by setting up MahaRera. The Act ended the practice of real estate developers diverting funds collected from homebuyers to other projects or for land purchase.
Moreover, as it is now mandatory for developers to park 70 percent of the amount collected in an escrow account, its introduction did coincide with the slowest growth in the real estate sector, according to experts.
The report is based specifically upon the average turnaround time between the launch of the project and completion of the first floor slab. This duration could be considered as a buffer period that was earlier utilised by developers to secure necessary approvals after launching the project. Among Tier-I cities, maximum construction delay in the past was noticed in NCR and Kolkata.
The report also notes that increased accountability of developers has given a boost to the cement sector as well. Cement is not just a major material in building construction but also an indicator of growth in construction and allied industries.
Cement consumption has grown by 9 percent between FY17-18. It is expected to grow at a rate of 8 percent in FY19. It should be noted that housing and real estate contribute 65 percent of the demand for cement.
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