New real estate law may increase home prices
AHMEDABAD: The government has introduced the Real Estate (Regulation and Development) Act, 2016 to bring transparency to the sector, and rein in errant developers. However, a research by a student of Cept University has found that the provision of imposing penalties on developers for breaching provisions of the new law may actually increase property rates with the consumer having to shell out more.
The findings of research hailed the the single-window system for clearance of real estate projects and expressed hopes that it will provide strong platform for consumers and developers both to bring down the average approval time.
The research by Himani Pandya, studying at Cept’s faculty of management, is titled “Agenda for Change: Real Estate (Regulation and Development) Act – Consumer Centric?” and the study suggested that implementation of the Act at state level must be efficient to address the needs of all stakeholders like buyers, agents and developers. The research revealed that major factors affecting buyers have been lack of transparency which leads to deviation from approved plan and delay in possession, lengthy documentation process, and poor complaint redressal system.
Real estate developers, themselves, have been facing issues with inadequate funding channels, strict bank norms on releasing pre-approved loans and prolonged regulatory clearance system, stated the research report which was conducted under the guidance of Dr Mercy Samuel, professor in faculty of management at Cept University.
The study also found that the level of acceptance of the Act among stakeholders showed a huge gap, which ideally should not be there, if this law is meant to make the industry follow transparent practices. Not unexpectedly, many developers did not agree to the provision of penalizing developers for delay in handing over possession to consumers.
The Act spells out penalties that may extend up to 10% to 20% of the estimated cost of the real estate project, if a promoter fails to register the project or provides false information or contravenes the provision of the Act.
“The intention with which this Act has been prepared should reach its expected outcome. There was a need for such an authority for regulation and development of the industry. Though the results will be observed in the future, the implementation at state level would be a very critical task,” stated the research.
The study concluded that the Act has been developed to protect the interest of the consumers, but it would be ideal to include the interests of developers as well, because punishments and penalties for developers would lead to hike in property rates ultimately affecting the consumer.