How to make more money in Real Estate

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All You Need to Know about RERA
General Wednesday, 15th February 2017

The Real Estate (Regulation and Development) Bill, 2016 was introduced by Dr. Girija Vyas, Minister of Housing and Urban Poverty Alleviation in 2013. The Union Cabinet of India approved 20 major amendments to the Bill upon Rajya Sabha’s recommendations, in 2015. It then finally got approved by the Rajya Sabha and the Lok Sabha on 10th and 15th March, 2016, respectively and finally became an Act in May, 2016.

  • What is It?
    RERA aims to create a regulatory body for the real estate sector. The main aim of the Act is to protect the interest or buyers and promote timely delivery of properties or projects. In order to achieve this, registration of the projects covering either more than 500 sq. ft. land or involving at least eight apartments has been made compulsory. The builder or “promoter” will need to furnish the details of the project online and this information would be available to the public. Earlier, builders used to include extra spaces in the carpet area and charged buyers 20-30 per cent more than what would have been the charge on actual carpet area. Unaware buyer also used to pay the asked amount. The RERA specifically defines the carpet area to avoid unaware buyers to fall prey to the promoters’ tactics. Next, promoters would be required to keep 70 per cent of the amount received from buyers in a separate escrow account and would be allowed to use that money only for the development of the project for which the money has been paid. This will not only ensure speedy development of the project but will also dissuade promoters to misallocate the funds. Last but not the least, promoters would need to get various approvals from all the competent authorities before starting off with a project. This will ensure buyers’ protection from future legal issues.

  • Why RERA?
    Industries like telecom, banking, stock markets, insurance, pension, film, FDI, food, cricket, etc. all have regulators in the name of TRAI, RBI, SEBI, IRDAI, PFRDA, CBFC, FIPB,FSSAI and BCCI, respectively. However, the sector which has the third largest contribution to GDP, which attracts most of our investments and which is the root cause of black money and corruption, is ironically not regulated. The sector I’m referring to is real estate where lacks and crores of black money exchange hands. Buyer pays in unaccounted cash to lower the registration amount and hence, stamp duty and seller demands money in cash to evade taxes. The use of black money in realty transactions creates a win-win situation for both the parties.

  • RERA aims to solve all these problems by making the transactions transparent. Compulsory registration and revelation of details of the properties will narrow the trust deficit in real estate industry and improve transparency. Moreover, timely delivery of projects will lead to an increased demand. People currently fear investing in real estate because the projects are not completed for years and their money remains locked. Now since RERA promises timely delivery of projects, demand is expected to increase and this will also lead to decrease in inventory levels. Currently on of the reasons for high prices is high inventory. When the inventory will decrease, prices will automatically decrease, triggering even more rise in demand. In nutshell, the cycle of real estate where inventories, prices, supply, demand and interest rate chase each other, will run smoothly and in a balanced way!

tripti sharma
very nice!!
Nov 29, 2016