RERA will make realty biz more transparent, organised

Hyderabad Realtors Association (HRA), which represents the interest of real estate brokers, agents and consultants, has been doing a pioneering work to bring more professionalism into the real estate sector in Hyderabad and Telangana. As president of HRA, Sumanth Reddy Arani, an alumnus of XLRI, initiated several measures and conducted workshops to help property consultants and agent upgrade their skills.

“RERA Act is extremely positive development for the real estate sector in Telangana. It will make property transactions more transparent and the sector more organised. With this law in place, foreign investors will also come forward to invest in this sector in the State,” Sumanth Reddy tells P Madhusudhan Reddy

Telangana government is likely to bring in Real Estate (Regulation and Development) Act, 2016 or RERA Act, from next month. What kind of impact this law will have on the real estate sector in Telangana?
RERA Act is a positive development. It will help highly-disorganised real estate into an organised sector in Telangana. It will make property transactions more transparent, thereby enhancing investors’ confidence. Accountability will also go up. Consumers will no longer face the fears of inordinate delays in project execution as the law will force developers to hand over units within a stipulated timeline. Developers will have no option except making deliverable commitments. Besides, developers can’t divert funds to other projects. Encouraged by increased transparency, foreign investors will also come forward to invest this sector in Telangana. However, there are some loopholes in the law and they are needed to be plugged.

You are saying there are some loopholes in RERA Act. Can you explain what the shortcomings are?
The key loophole is that under the new regulation, even oral commitments will be binding on the developers and agents. This is tricky as it’s very difficult to get evidence in the case of oral commitments. Then, how can authorities make developers and agents liable for oral commitments when there is no evidence as such? Such provisions can be misused. Other shortcoming is that anyone can become a real estate agent or broker if he or she pays Rs 10,000 or some fee and takes licence. This is also not a good idea because people with zero knowledge about the sector will become licensed agents or brokers. That will damage the sector. To avoid this, the government should train agents and conduct a test before granting licence to them. HRA is ready to help the government in this regard.

Some say property prices will go up post the implementation of RERA Act. How far is this true?
Of course, there will be price escalation by anywhere between 20-25 per cent. Earlier, developers had many sources for raising funds. There used to be pre-launch marketing and advances from customers. Post RERA, developers can’t start projects without financial closure. That means a developer has to tie up all the funds required for a project. Then only, he can complete it within deadline. To achieve financial closure, developers need to borrow from banks, private equity firms or NBFCs. Such funds come at a cost i.e. interest which is not less than 14 per cent. There will be other costs as well. Therefore, prices will definitely go up.

As you are aware, property prices have gone up abnormally in Hyderabad in last few months. What is the reason?
It’s true that prices have gone up steeply. In some areas like Mokila and Shankerpally on the Hyderabad outskirts, prices of open plots escalated by four times or 400 per cent in just two years. This abnormal rise in prices is due to speculators. In real estate, there are three categories of consumers – end users, investors and speculators. End users are those who buy properties for their own use while investors purchase properties as long-term investments. Speculators are those who keep buying and selling, leading to rise in prices. End users need to exercise caution while buying properties in such locations where prices are driven up by speculators.

What kind of measures do you think the Telangana government has taken up to encourage real estate sector?
Telangana has become a model state for many proactive policies. There is green channel for granting permission to real estate projects. All permissions are being given within one month. If approval doesn’t come in one month, it is deemed to be approved. Moreover, infrastructure is being improved. New flyovers and underpasses are coming up. Hyderabad is the hottest destination for property sector in the country. IT and Industries Minister K T Rama Rao has been promoting Hyderabad in India and abroad. That’s paying rich dividends for the sector.