Mumbai and Pune have the maximum number of projects registered under the Real Estate Regulatory Authority even as implementation of the new law remains slow with 11 states yet to notify final rules.
Only seven states have a functional website for RERA and just four have permanent regulators, a report by Edelweiss Research said. Pune has 862 registered projects and Mumbai 542 since the new law was implemented on May 1. Karnataka received over 700 applications for registration, Haryana got 400 and Tamil Nadu over 100. Uttar Pradesh's RERA list shows 650 projects in Noida.
The new housing law seeks to improve transparency and accountability in India's cash-driven real estate sector. The law makes it mandatory for developers to register projects and get approvals before starting sales. It also mandates that 70 percent of the funds raised from sales should be kept in a separate account as builders used to divert funds raised from one project to another.
The provisions on capital adequacy, full disclosures and strict penalties will lead to more transparency and customer confidence, said Edelweiss Research. “This, coupled with favourable long-term fundamentals should benefit the sector,” it said.
Short-Term Supply Constraints
Edelweiss said that a “meaningful number of ongoing projects” remained unregistered after July 31, which was the deadline for RERA implementation and momentum should pick up over coming days. Sales in such projects are now prohibited until registered.
“This together should lead to a new sales slowdown in the short term and a gradual recovery over coming months. Supply constraint should support current pricing,” said Edelweiss Research.
In the medium term, less-capitalised builders may find it difficult to comply with RERA, which in turn may lead them to partially or fully exit projects. Well-capitalised builders, however, will see demand and realisations grow, the report said.
In the long term, Edelweiss expects only serious market participants with the “ability and willingness” to comply with RERA continuing in the real estate business.
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