The Real Estate sector is at the start of the next boom cycle, with government support and policy and with a vision for housing for all Indians; RERA is the single largest Systemic reform that would transform the completely industry.

The first basic investment that every individual wants to make is invest in his own home, as the saying goes " Roti Kapada aur Makaan". Whether it is a necessity to stay or invest money in Real Estate has always been the fancy for Indian Investors. Of the major reasons why as an asset class real estate has been so favored is because of the fact that a large part of the value is paid in cash and thereby it gives an avenue for large investors to hoard their cash holdings. Post demonetization a lot has changed in terms of how transactions are really carried out but inspite that a major crash or correction has not really happened in the real estate sector.

With Government Schemes like ‘ Pradhan Mantri Awas Yojana' ( PMAY) and ‘ Housing for All' by 2022, there is a huge demand and upside expected in the real estate sector in the coming few years. With affordable housing leading the product basket within the sector.

Real Estate, widely considered to be a major asset class, has been traditionally plagued with opaque practices, information asymmetry, and a muddled regulatory framework in India. One of the frequently cited reasons for the current slowdown in residential sector is the trust deficit between customers and developers.

For the past many years, developers have not been able to deliver on their commitments, seriously denting the confidence of potential buyers.

The Real Estate ( Regulation and Development) Act 2016, aimed at bringing in transparency and redefining the engagement between various stakeholders, can be a potential game- changing event. The level- playing field created between various stakeholders would provide much needed confidence to investors and home buyers to take a relook at the sector and make informed investment decisions. While the Act might transform the way in which various stakeholders operate, it will particularly have a far reaching impact on residential developers, who would need to recalibrate their business practices to stay in the game.

Real Estate (Regulation & Development) Act 2016 The Single largest reform that the sector is going to witness is the implementation of RERA. The Real Estate sector is one of the most globally recognized sectors. In India, real estate is the second largest employer after agriculture and is slated to grow at 30% over the next decade.

With introduction of RERA there would be a paradigm change in which the sector would operate and would be beneficial to the growth and development of the sector and help the end consumers by giving them adequate protection with check and balances at every stage.

This Act obliges the developer to park 70% of the project funds in a dedicated Bank Account. This will ensure that developers are not able to invest in numerous new projects with the proceeds of the booking money for one project, thus delaying completion and handover to consumers.

Any project or development of 500 square metres or more than eight apartments will have to be registered with the RERA thereby even giving adequate protection to smaller projects as well.

The biggest problem faced by investors in the sector is delay in project completion and the small consumers would not have the ability to act against large developers. Any delay in project completion will make the developer liable to pay the same interest as the EMI being paid by the consumer to the bank back to the consumer.

Any major change in terms of plan would require 2/ 3rd approval from the allottees for the promoter/ developer to undertake that change. All information in terms of developer and his last 5 years track record and project details needs to be put up in the public domain. A maximum jail term for a developer who violates the order of the appellate tribunal of the RERA is three years with or without a fine which can be up to 10% of the project cost.

In order to make the sector completely organized all real estate brokers will have to obtain a brokerage licence from State Governments. After taking that licence, they will have to undergo certain courses to become a Certified Broker. And to maintain that licence, every year they will have to undergo such courses. Thereby making the brokerage market which was completely unorganized a better organized market where false promises and commitments from the brokers in order to sell the units are taken care of. The sales would be made strictly on a carpet area basis only so that the buyer is clear on the useable area that he would get rather than built up and super built up etc. Promoter to compensate buyer for incorrect statement with full return of property cost with interest hence advertising and false promises made by developers often would be checked to a major extent.

Maximum 1 year extension in case of delay due to no fault of the developer if the case may be, dispute resolution within 6 months at RERA and FERA appellate and Conveyance Deed for common area in favour of Resident Welfare Association ( RWA). There by making the Home Buyer in case of RERA the King.

Complete change in the ball game as far as developer is concerned and in the coming years many unorganized players will perish and there would be huge consolidation within the industry and only few well organized players would survive and do well.

Conservative Project Finance Structures RERA would require new projects to have all approvals before a launch. This would lead to larger gestation period prior to a project launch. Consequently new projects would require higher proportion of working capital towards land procurement, architects, consultants and regulatory approvals being financed by promoter equity as against the current practice of sourcing it from customers through hurriedly done half- baked project launches.

Increased Participation by Institutional Players In the past, many of these institutional players have burnt their fingers badly due to lack of governance and execution efficiency. Their past experiences have thereby forced them to either stay away or invest through extremely conservative debt structures to protect their investments.

Cheaper Capital Pricing by Institutions Capital pricing at the new investment stage is always a function of perception of risk- market, regulatory, execution and counter party. RERA would reduce the risk perception significantly due to its stringent disclosures and penal provisions.

A most noteworthy benefit for home buyers due to RERA is that if the project completion is delayed, the developer will have to pay the same interest as EMI paid by the buyer. This will ensure timely completion of the project.

Any structural defects in the project from 5 years to be rectified within 30 days by the promoter free of cost.