Hyderabad: The real estate fraternity has welcomed the rules to the Real Estate (Regulation and Development) Act, 2016 that Government of Telangana has notified. They said it will bring in more transparency in real estate transactions and unambiguous documentation among others.
The Telangana State Real Estate (Regulation and Development) Rules, 2017 are applicable to all real estate projects whose building permissions are approved on or after January 1, 2017 by the competent authorities such as municipal corporations, municipalities, nagar panchayats among others. The home buyers can appeal to the Rera authority if the builders do not adhere to the delivery schedules. In such cases, the builders will have to pay bank interest charges plus two per cent for the time period the project is delayed. If the issue is not resolved, the appellate authority can ask the builder to pay a penalty upto 10 per cent to the home buyers. In the final stage, the authority can award an imprisonment.
“It is a win-win situation for all. Since it is mandatory for the project to have a financial closure, the project will be better placed for getting loans. There will be little chance for project costs escalating due to delay in execution. This will in turn reduce expenditure for home buyers in terms of interest or rent,” said Jakka Venkat Reddy, Telangana Builders’ Association president.
Credai Hyderabad president S Ram Reddy said the rules are practical, particularly escrow accounts which stipulate that the 70 per cent of the amount secured from the home buyers will have to be used for project completion only.
“The documentation for projects will be available for reference with the Rera Authority. This will mean that there cannot be deviations. Home buyers can also see the history of projects by builders,” he said. The increased documentation will mean a higher compliance costs for the builders. “It will take about six months or so to understand the impact of Rera on the cost. We think that the cost of project with the implementation of GST and Rera can go up 20 per cent,” he said. Builders will pass this on to the buyers.
Since a financial closure is needed, builders will be cautious in announcing new projects. This will impact the supply of the units, he said. C Shekar Reddy, former national president of industry body Credai said the rules have excluded the projects sanctioned before January 1.
“There is no ambiguity on which projects are included and which are excluded,” he said adding that the builders will now have three months window period for registering the projects with the authority. “Rera is a central law for regulation of real estate sector, with the involvement of States. Telangana looks to have brought out a workable model and has the general acceptance of the developer community. In all, investor confidence will go up with a law to protect home buyers’ interest,” said Samson Arthur, director, Hyderabad, Knight Frank India. “We expect a cautious start at the beginning but a whole new paradigm shift in the way housing sector and real estate as a business model will evolve from here on,” he said.