The reports of India ratings and research convey that India Real Estate Bill will shake up the realty industry. This bill has given transparency in the complete process of real estate industry. It also locks the amount of the project, it means the builder will not be able to utilize one projects amount to any other project. This will in turn reduce the project delays and indulgence of black money in the construction. The bill has also reduced the interest ‘keeping home for all’ scheme in mind. Thus, it clearly indicates how beneficial this bill is for the consumer and how it is blowing the minds of real estate goons.
The real estate regulatory bill has been passed in both the houses of Parliament. The bill has been intended to be brought and implemented to protect the common consumers and prevent the consumers from being exploited. This also attempts to bring transparency. But on an overall basis the trend watchers feel that the bill is too stringent and will be a factor to shake up the not so big and stable developers and builders.
In the next three months the regulatory bill will be in place and will be implemented and it is imminent that a huge part of the real estate sector of India will be shaken. This was forecast by India Ratings and Research. The bill and the Regulatory authority (RERA) won’t allow any developer to launch any new project without getting all the approvals and the builder will have to deposit 70 percent of the sale proceeds in an escrow account once this RERA is implemented. The research firm, India Ratings and Research cautioned that this will most likely to impact the liquidity of the realty players in the short term period.
There will certainly be a pressure on the developers to gather more funds either in debt or equity. The firm opined that the organized players of the real estate sector will have access to varied fund sources like loans from the banks, non-banking finance companies, private equity, structured debt capital and non-convertible debentures. Thus it is most likely that they will tide over the crunch of liquidity through the raising of the debt and the cost of such borrowed capital will eventually result in weaker credit profiles in the short term duration.
The new regulations prohibit the sale of the projects or the apartments without due registration with the concerned Real Estate Regulatory Authority. This requires that the real estate developer submits all the approvals and gets the Commencement Certificate which is an essential prerequisite.
Sales proceeds of the new projects are supposed to be the key source of cash flow and liquidity for the builders and developers. More tighter situations of liquidity could compel the builders to rely more on the projects done on joint ventures with land owners due to lower availability of extra and surplus cash for buying land, property, aprtments in BANGALORE, MUMBAI etc. said the research firm, India Ratings.
India Ratings also said that the provision of the bill for depositing 70 percent of the proceeds of the sale in a separate escrow account will impact developers with the new projects in the cities like Mumbai and the high end projects in the other cities. This is because the component of the land prices are much high than the construction cost in comparison.
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