Real Estate in RERA Era

The idea of a impartial regulator in a high impact industry, in general, & RERA for Real Estate, in specific, is very good as it protects homebuyers’ interests, cleans up the industry and brings in much needed transparency.

There are certain clear long lasting benefits of such regulations, including the cost of land going down, increased investor confidence, bringing in an era of transparency, increased efficiency in the sector and organised play. Most benefits will become clearer once the dust from the storm kicked in by Demonetisation, RERA, GST and others in quick succession, settles down.

However, one needs to brace for the short to mid-term impact, as a buyer (and as seller).

Short to mid-term impact on Industry:

1.    Industry consolidation; Smaller/ unorganised sector to almost vanish. Also, fewer “new” projects by the remaining players leading to lesser supply, skewing the demand-supply equation

2.    The big margins, Investors would expect, when they enter at a ‘Pre-launch’ will no longer exist making it less-lucrative for pure investments

3. Pricing to go up, in view of the risk being transferred to the Builder

Here’s some examples of how the pricing will get affected, directly by RERA in the short term*:

In all, there could be an escalation of costs of between 10 to 15 percentage, while complying to the regulation.

While most states are yet to roll out RERA in full, there are also other under currents, which are almost simultaneously getting applied like the GST, which could impact the cost of ownership marginally (experts differ on a marginal increase vs. marginal decrease).

Even when all considerations are put together, the cost of Real Estate could go up substantially, before tending to plateau off, in the longer term.

Hence, if you’d see a decent project with Occupancy Certificate, bargain all you want, and yes, do BUY quickly.

If you're aware of projects that fit the bill, please comment below, so others can benefit. Or if you have questions, fire away, so experts in my network can take a crack at it.