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The Real Estate Regulatory Bill Royal Nod From The Rajya Sabha
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With a Rajya Sabha nod, Real Estate Regulatory Bill takas another step
The Rajya Sabha approval to the much awaited Real Estate Regulatory Bill proves there is indeed light at the end of tunnel. Most of the lacunae in the functioning of the sector can be attributed to lack of clearly defined regulatory norms. However, it can now be said that things will gradually fall into place. Delays in project completion, misuse of funds by developers and ambiguity over saleable area parameter are few things that have depleted buyer’s trust over the years. This bill based on three major foundation stones: Transparency, Accountability and Efficiency has the power to tie all loose ends in the real estate sector. A genuine intention has been leveraged and the impact of this Act will be large.
Transparency Accountability Efficiency
Enterprise Details

Approvals Layout plan -
phase-wise

Development Work to be
executed, proposed
facilities

Details of Professionals
and Real Estate Agents

Declarations of Title and
encumbrances

No of units to be
developed and their
carpet area
  "Likely period of time" within which promoter undertakes to complete the project or phase thereof

Minimum 70% of realization to be deposited in separate bank account to cover the cost of construction.

Builders will pay interest to home buyers for any default or delays at the same rate they charge them.

Builders will be liable for structural defect for upto 5years.
  Timely completion will lead to reduced speculation and sales at justified price points.

Deception in prices will go as stock will be sold at carpet area. In tune with practices in developed world

Diversion of funds/ proceeds to different projects and other motives like land accumulation will be curbed.
Based on our data, Urban Development Minister M Venkaiah Naidu, said "As per available information for 27 major cities including 15 capitals, 2,349 to 4,488 new housing projects were launched every year between 2011 and 2015. Thus in these 27 cities during these last five years, a total of 17,526 projects were launched with a total investment value of Rs 13,69,820 crore"
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Quantification of benefits to the consumers and industry

New launches across 27 cities
Calendar Year No of Projects Units Launched Value of Units Launched
(Rs Crore)
2011 2,640 373,501 227,744
2012 3,705 455,114 280,538
2013 4,488 502,671 336,472
2014 4,344 513,688 302,487
2015 2,349 328,376 222,578
Total 17,526 2,173,350 1,369,820
Source: Liases Foras
Cities covered

MMR (Mumbai Metropolitan Region), NCR (national Capital Region), Bangalore, Chennai, Pune, Ahmedabad, Hyderabad, Surat, Kolkata, Chandigarh, Vadodara, Jaipur, Indore, Lucknow, Bhopal, Nagpur, Coimbatore, Nashik, Goa, Cochin, Mangalore, Thiruvananthapuram, Palghar, Boisar, Kanpur, Bhubaneswar, Rajkot, Patna


Incomplete projects have a huge negative bearing on India’s GDP. Delay in completion is a menace that has plagued the sector since long. For our analysis we have considered all the total supply across all the 25 cities under our coverage universe. About 34% of this supply is more than 12 months delayed. This estimated delay of residential projects amounts to 1.32% of GDP (2014-15) at current prices.

Project delays are the biggest menace for the Indian real estate and one of the key reasons for sky-high prices. The Real Estate Regulatory Bill, aimed at reducing delays and ensuring faster completion through Transparency, Accountability and Efficiency, is the requirement of the hour. Together these elements will bring about Efficiency by discarding any kind of deception in prices. Firstly, sales will happen on carpet area, which is a practice followed in the developed countries such as Singapore, UK etc. Secondly, the escrow account will help in curbing diversion and misuse of funds, thus ruling out speculative practices.
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Statistics of Delays
(total supply figures in mn sq ft)
Cities
NIL
Launched in 1 year More than 1 year
Less than 12 Months 12-
24
24-
36
36-
48
48-
60
More
than 60 Months
Grand Total
NCR 65 140 201 195 111 84 21 16 833
MMR 59 95 130 83 35 27 19 20 466
Bangalore 73 129 108 67 14 8 8 2 409
Pune 44 48 102 45 12 5 2 2 260
Ahmedabad 33 52 73 33 7 3 0 0 202
Chennai 12 59 72 26 11 5 3 1 190
Hyderabad 23 17 57 25 17 6 9 13 168
Surat 20 39 32 6 1 0 0 0 98
Kolkata 11 25 30 12 9 5 0 0 92
Bhopal 8 32 29 11 1 0 0 0 81
Vadodara 14 28 23 4 0 0 0 0 69
Chandigarh 3 10 26 15 7 4 0 0 65
Jaipur 7 21 20 10 4 0 0 0 62
Other cities* 24 62 98 47 15 8 3 2 260
Grand Total 396 758 1001 579 244 155 65 57 3255
% 12% 23% 31% 18% 8% 5% 2% 2% 100%
Source: Liases Foras
Cities covered

MMR (Mumbai Metropolitan Region), NCR (national Capital Region), Bangalore, Chennai, Pune, Ahmedabad, Hyderabad, Surat, Kolkata, Chandigarh, Vadodara, Jaipur, Indore, Lucknow, Bhopal, Nagpur, Coimbatore, Nashik, Goa, Cochin, Mangalore, Thiruvananthapuram, Palghar, Boisar, Kanpur, Bhubaneswar, Rajkot, Patna


Incomplete projects have a huge negative bearing on India’s GDP. Delay in completion is a menace that has plagued the sector since long. For our analysis we have considered all the total supply across all the 25 cities under our coverage universe. About 34% of this supply is more than 12 months delayed. This estimated delay of residential projects amounts to 1.32% of GDP (2014-15) at current prices.

Project delays are the biggest menace for the Indian real estate and one of the key reasons for sky-high prices. The Real Estate Regulatory Bill, aimed at reducing delays and ensuring faster completion through Transparency, Accountability and Efficiency, is the requirement of the hour. Together these elements will bring about Efficiency by discarding any kind of deception in prices. Firstly, sales will happen on carpet area, which is a practice followed in the developed countries such as Singapore, UK etc. Secondly, the escrow account will help in curbing diversion and misuse of funds, thus ruling out speculative practices.
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*Lucknow, Indore, Nagpur, Nashik, Cochin, Bhubaneshwar, Coimbatore, Mangalore, Patna, Thiruvananthapuram, Goa, Kanpur
Total area delayed more than 12 months 1,100 (Mn sqft)
Cost to Economy (Rs Crore)* 165,064
Proportion of GDP (2014-15) at current prices** 1.32%
* Cost to Economy is estimated at construction and other cost of Rs 1,500 per sqft

**Estimated GDP 2014-15, at current prices is Rs 125.41 lakh crore (Source: Central Statistics Office)

Source: Liases Foras

Today, the inventory across major cities in India stands at one million units, clocking in a growth of approximately 22% on an annual basis. As per NHB, the housing shortage is estimated around 18 million units in urban India. Currently, 2,84,984 units are sold on a yearly basis and fulfil this shortage, sales have to grow more than 5 times. This is required for the inventory to be sustainable. In order to boost sales there has to be rationalisation of prices. Unless there is an uptick in sales, market would never be able to absorb additional stock which would lead to a decline in new supply.

While the bill protects consumer interest, faster approvals are also crucial for developers to prevent delays. Against this backdrop, regulatory authorities aim to promote single window system of clearances for real estate projects, wherein the projects and promoters both can be graded along with digitization of land records. However, the bill has a long way to go as far as faster sanctioning process is concerned. Thus, the problem is only Half-Solved.

A nation's economy has its foundation in consumer confidence. The bill will be instrumental in alleviating dwindling confidence and weak sentiment that prevails across the sector. With increased transparency, real estate sector will start to look up and find itself on a global footing.

The Government of India has also mooted an ambitious policy called "Housing for All" for the urban poor, and without the proper regulatory mechanism in place, this policy will be unable to yield the desired results. The amendments are in the right direction, but it is imperative that they be implemented within the time frame when the momentum is intact. With the Cabinet nod to the amendments, the Bill is very close to becoming an Act, after which it’s the State’s responsibility to bring it to effect by appropriate measures.
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The data of real estate projects has been collected through field surveys as well as primary and secondary research. As a result of the methodology, sources of information are not always under control of Liases Foras. The information and analytics also undergoes estimates and compilations derived out of statistical procedures. Liases Foras does not by any means guarantee the accuracy of the information provided in the above document. However, Liases Foras undertakes due care and statistical checks in the collection of the data and its research. LiasesForas makes no representation or warranty regarding the standing, credit or otherwise of any person, firm or company mentioned in the above document, or the suitability of the information for any purpose.A person is required to undertake his own due diligence with regard to its investment decisions, and investment decisions should not be purely based on the document presented above.

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Author:
Mr. Pankaj Kapoor

Founder and MD-Liases Foras Real Estate Ratings and Research Pvt. Ltd


Email id: pankaj@liasesforas.com

Ms. Namrata Sen Chanda

Content Manager

Email id: namrata@liasesforas.com
 
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About Us. Liases Foras: The pioneer in scientific reasearch in real estate Strategic Partner: dmg::information

Founded in 1998, Liases Foras is a non-brokerage research centric firm that offers data and advisory services. Our works on industry and scientific prognosis of the local market is highly regarded. We have an organized and structured data source on real estate and property trends in India, which is updated on quarterly basis by primary market survey.

With a team of MBA’s, Urban planners, architects, chartered accountants and statisticians Liases Foras is progressively done studies in field of valuation, risk assessment, future forecasting and price behaviour. Our clientele includes leading mortgage companies such as HDFC Ltd, Axis, among others, real estate fund houses, developers, government bodies and leading international research organizations. We are also research partner for CNBC Awaaz real estate awards from 2012 onwards.
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