Realty stocks rallied 1-8 percent on Wednesday after the cabinet yesterday approved the Real Estate Development and Regulation Bill that paved the way for setting up a regulator for the sector.
The Union Cabinet on Tuesday approved amendments to the long-pending real estate bill to bring under its ambit commercial and all ongoing projects as also brokers, while safeguarding consumers.
While Bill already provides for strict penalties including jail for errant builders, the amendments seek to make it mandatory for all developers, including of housing projects, to keep minimum 50 percent of funds collected from buyers in a escrow account to meet construction cost.
Through the amendments to the Bill of 2013, the Cabinet has extended the applicability of the Bill to commercial real estate also. Ongoing projects that have not received Completion Certificates have also been brought under the purview of the Bill and such projects will need to be registered with a proposed regulator within 3 months.
"It is positive for the sector over the long term as it will increase transparency," said HDIL MD Sarang Wadhavan.
He added that the proposed regulator should also look into granting speedier clearances – which realtors say sometimes hold up projects for years.
Ghulam Zia, executive director, Knight Frank also believes the passing of this Bill is a huge positive for the sector that has been mired with lack of credibility. The Bill demands developers park 50 percent funds collected for projects with scheduled banks and this Zia believes can revive confidence and thereby sales.
Another major modification is that promoters will not be allowed to change plans and structural designs without the consent of 2/3rd of consumers of a project, according to an official statement.
Real estate agents also have been made punishable for non-compliance of orders of regulatory authority. Appellate Tribunals will also be set up under the proposed law.
Promoters will be mandatorily required to disclose all information regarding promoters, project, layout plan, schedule of development works, land status, status of statutory approvals, proforma agreements, names and addresses of real estate agents, contractors, architect and structural engineer.
JP Morgan believes the key beneficiaries of this Bill will be developers which have a consistent track record of executing projects on time, such as Prestige Estates, Godrej Properties, Sobha Developers and Oberoi Realty.
According to the brokerage, Mumbai will be the market that will be the most affected as norm violations have been at a maximum in the city, with delays and customer grievances being at an all-time high.
"Bangalore will be the least affected. NCR, too, will likely take a hit on account of the new regulations, but the impact should be lower than in Mumbai as project registration before launch is mandatory in Gurgaon and Noida; however, project delays even in NCR have been unacceptably long," said the brokerage.
(With inputs from PTI)
| Company Name | Price at 2:30 PM | % Change |
| Anant Raj | 44.05 | 5.64 |
| Brigade Ent | 157.7 | 3.31 |
| DB Realty | 71.6 | 1.92 |
| HDIL | 135.05 | 5.02 |
| Hubtown | 106.1 | 3.26 |
| Indiabulls Real | 71.85 | 2.13 |
| Kolte-Patil | 231.1 | 1.12 |
| Landmark Prop | 3.45 | 6.15 |
| Oberoi Realty | 304.3 | 1.86 |
| Omaxe | 133.9 | 1.09 |
| Orbit Corp | 13.5 | 3.45 |
| Parsvnath | 20.45 | 3.28 |
| Puravankara | 71.9 | 7.96 |
| Sobha | 414 | 3.82 |
| Sunteck Realty | 279.5 | 1.82 |
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