Before discussing the factors that influence the home buying pattern in the Indian real estate market, let us first understand what RERA is and how it is helpful for the Indian Real Estate industry.
RERA or the Real Estate regulation Act of 2016 was amended to control the inordinate delays in the delivery of the project and inferior quality of construction.
The RERA has been enforced since 2017 that brought major relief to the home buyers by putting stringent regulation for the timely delivery of projects. It has boosted the real estate market. Before the enforcement of RERA in the last few years, the real estate market was rapidly growing with projects mushrooming everywhere in the metropolitan and Tier 2 and 3 cities. This also led to various cases of fraudulent as Builders did not deliver the projects on time or delivered inferior to what was promised to the buyers. This immensely affected the image of the real estate industry that negatively impacted economic growth. Various projects were stalled for years. There were instances of Builders selling a single plot to more than one buyer. All these shady activities are finally being eradicated by the act.
In some places like Noida there were many homebuyers who did not get possession of their property even after they paid the full amount to the developer. Under the RERA, these developers now have to pay an interest rate of 2% points above SBI’s lending rate to the homebuyers. Under the RERA law, these fraudulent developers can face 3 years of imprisonment. The RERA also states that the buyers will have to pay only for the carpet area within the walls. The developer can in no way charge for the super built-up area. Also, any defect of the house will be the responsibility of the Builder and they have to compensate or fix it in 5 years. The builders can now not use your money to invest in some other project. The developer will have to transfer at least 70% of the amount that they receive from the homebuyers to the escrow account going by the RERA law. Regulatory bodies will be set up in every state to resolve disputes between buyer and developer within a period of 120 days. The promoters now are not allowed to change the design of the project without the consent of the buyers under the RERA.
After RERA was enforced in 2017-2018 the real estate sector has received a positive response from home buyers across India. Transparent pricing and delivery with various schemes by the government like lowering GST and Repo rate that has lowered the home loans are the different reasons that have influenced homebuyers to invest in the real estate sector. As per sources, 50% of the home buyers in the Delhi- North Central Region has invested in property because of the implementation of RERA while in Kolkata 58% of the home buyers were influenced by lower rates of home loan. The home buyers in Pune MMR and Bangalore have also admitted being influenced by the same attractive pricing of the real estate properties. However, the scenario in Hyderabad is that 61% of the home buyers said that they were interested to invest after being attracted by the attractive pricing.
According to experts, the attractive pricing, sound physical and social infrastructure development and increase in office lease activities have contributed towards making Hyderabad one of the most active cities to be engaged in the real estate market of India. As of now contributing to it are the Government policies and political stability after the state bifurcation has also influenced the real estate market of Hyderabad over the past few years. Considering the sales data of Hyderabad the top 3 micro markets that had the maximum housing sales between the second quarter of 2018 to the first quarter of 2019 were Pocharam, Bachupally and Kondapur. In the top 2 markets of the cities, the average prices were between INR 2550 to INR 4000 sq ft. In Hyderabad, the affordable market with reasonable pricing is in high demand. But the buyers in the Delhi North Central Region state have a different reason. The 50% of the buyers in this area invested in the real estate market in the past one year because of the trust that the implementation of RERA was able to build despite the negative image of the real estate market of NCR that is contributed by some fraudulent developers. The buyers are trusting in the real estate regulatory Act and taking their decision depending solely on RERA.
A survey indicated that not only attractive prices influenced the purchase pattern of the buyers but the assurance of on-time delivery and immediate possession also played a major role to catalyse the interest of the buyers. Therefore, it is clear that in the NCR area strong players in the real estate market with good projects are drawing more sales and enquiries. However, in Kolkata, there is no Central Government-linked Real Estate Regulatory Act to back the homebuyers’ confidence. Hence, 58% of the home buyers have admitted that because of lower home loan rates, they were convinced to buy homes in the last year.
For Tier 2 and 3 cities like Panipat, Mysore, Lucknow, Nagpur and Visakhapatnam RERA could not impact the buying decisions of the home buyers. Rather 27% of the respondents in these cities admitted that lower home loan rates were their primary reason for purchasing a home in 2018. In the last one year, the new Real Estate Regulatory Act was able to build trust for 82% of the NRI buyers. The NRI homebuyers generally invest by large in the under-construction projects and the problem of delayed projects or stalled projects were a major problem for them. There the NRIs were reluctant to invest in properties in India.