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Tamil Nadu RERA: Impact on the property market and home buyers

With the notification of the Tamil Nadu Real Estate (Regulation and Development) Rules, 2017, the residential real estate sector in the state is all set to experience a sea change. On the optimistic side, … READ FULL STORY

The post Tamil Nadu RERA: Impact on the property market and home buyers appeared first on Housing News.

With the notification of the Tamil Nadu Real Estate (Regulation and Development) Rules, 2017, the residential real estate sector in the state is all set to experience a sea change. On the optimistic side, the Real Estate (Regulation and Development) Act (RERA) is expected to create a level playing field for developers, better transparency and accountability, timely delivery of projects and greater absorption rates, accompanied by an increase in consumer confidence. On the other hand, compliance can be a challenge for developers and promoters in the beginning, as it requires all construction approvals before registration.

Moreover, promoters are legally bound and liable, with either imprisonment up to three years or compensation of up to 10 per cent of the total project cost, in case of failure in compliance or violations in land title, scheduled completion and maintenance of the project. Therefore, in our opinion, developers should be extremely careful about providing accurate estimates regarding their projects and the sale agreement.

“The need for a regulator in the Indian real estate business has been long awaited and RERA will essentially be the Indian realty watchdog. Chennai’s market will begin to witness positive sentiments and therefore, robust demand, post RERA. Potential investors in Chennai, who refrained from investing in real estate for want of transparency, would now have an ‘a la carte’ list to choose from and make well informed and intelligent decisions,” says Shaju Thomas, director, office services, Colliers International India.

Tamil Nadu RERA: How it will impact developers

As per Colliers Research, the holding cost for developers should increase and may result in an increase in prices, as it is mandatory for developers to assure compliance of their ongoing and upcoming projects with stringent guidelines specified by the Act. However, considering the sluggishness in the residential market, after demonetisation and announcement of the RERA, the pressure of increase in costs, is unlikely to be passed on to home buyers in the short run.

In addition, Chennai recorded about 2,300 units of new launches in Q1 2017, majorly contributed by reputed developers, whereas, small developers have adopted a wait-and-watch approach. Developers are also paying greater attention to completing their existing projects and clearing their inventory. On successful implementation of RERA, we expect the market to witness exit/ consolidation of small builders and fly-by-night developers, while the organised developers will make bigger endeavors.

See also: What is RERA and how will it impact the real estate industry and home buyers?

Colliers Research would advise developers to be more realistic in marketing their projects, as they will have to ensure that there are no deviations in the final product from the approved layout and specifications, as mentioned on the website/ product brochure. Likewise, as 70 per cent of the project amount will have to be deposited in the dedicated project account, developers will have to strategise project-specific plans and cost estimates.

Therefore, improved project planning, obtaining all necessary approvals on time and use of modern construction technologies to speed up the construction process, will help developers to avoid delays, manage project funds efficiently and align themselves with all the RERA guidelines for a smoother transition.

Delays likely to affect RERA registrations

Owing to the delay in finalising the RERA rules in Tamil Nadu, it is now important for the state government to set further events on track, in order to avoid any further postponement in the implementation of the Act. Until the regulatory body is established, the secretary, Housing and Urban Development Department, has been assigned to take on the role of the real estate regulatory authority for the state. It is mandatory for promoters to register ongoing residential projects and the same applies for real estate agents, as well.

Moreover, in spite of the absence of a permanent regulatory authority and a functional website for project registration, the Union Ministry of Housing and Urban Poverty Alleviation is insistent on immediately commencing registration of projects, based on the manual applications submitted to the interim regulators. As developers, promoters and real estate agents only have a three-month window to complete the whole process, we expect a rush for registrations.

Projects that need to be registered under Tamil Nadu RERA

The key entities for registration with RERA, include projects with land area greater than 500 sq metres, projects with more than eight apartments inclusive of all phases and all ongoing projects where the occupancy certificate (OC) or completion certificate (CC) has not been received.

Considering the concerns over the definition of ongoing projects in the draft rules, the state has framed more clarity in the final rules. It states that ongoing projects exclude layout projects where land is developed into plots and the roads and open spaces are gifted to the local body concerned and projects within the Chennai Metropolitan Area (CMA) for which the application for the completion certificate has been already filed with the Chennai Metropolitan Development Authority (CMDA) after being certified by the associated architect/licensed surveyor/structural engineer confirming the structural completion along with photographs.

In the case of projects outside the CMA, promoters should immediately intimate the structural completion of the projects to the corresponding local planning authority, within 15 days from the date of notification of the rules, with a copy to the office of the Director of Town and Country Planning, in order to be excluded from RERA registration. Furthermore, with a view to support the ‘Housing for All’ vision and encourage affordable housing, the registration fee has been excluded for Tamil Nadu Slum Clearance Board projects, affordable housing projects of the Tamil Nadu Housing Board and housing projects executed by the Tamil Nadu Police Housing Corporation.

The post Tamil Nadu RERA: Impact on the property market and home buyers appeared first on Housing News.

First Published on Jul 21, 2017 07:05 am
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