Published On: Wed, Mar 16th, 2016

Liquidity issues for builders to worsen after RERA gets implemented: ICRA

 

Liquidity issues for builders to worsen after RERA gets implemented ICRA

By Accommodation Times News Service

The real estate bill mandates developers to deposit 70% of the collections from the buyers in a separate account to meet construction costs including that of land

Liquidity issues for real estate developers, particularly smaller players, is likely to worsen during the initial transition phase after the real estate regulatory bill comes to force, said credit rating agency ICRA.

“Restriction on sales without registration of a project and restriction on acceptance of deposits without registering the agreement for sale are likely to add to developers’ funding troubles,” said Rohit Inamdar, senior vice-president, ICRA, adding, “Having a standard rate of 70% for all projects may prove to be harsh for developers in projects with high land cost component.” The real estate bill mandates developers to deposit 70% of the collections from the buyers in a separate account to meet construction costs including that of land. The bill also requires builders to register their projects with regulatory authorities disclosing details of promoter, schedule of implementation, layout plan, land status, status of approvals, agreements along with details of real estate agents, contractors, architects, structural engineers, etc. Registration is mandatory where land proposed to be developed exceeds 500 square metres or number of apartments proposed to be developed exceeds eight.

ICRA feel there needs to be increased coordination among multiple authorities for quick regulatory approvals. “The real estate regulatory bill only has provisions for penalising developers in case of delays beyond indicated timelines, but no distinction is made in projects that face delays because of delays in getting approvals,” it said in a statement.

“Although the Bill requires the Regulatory Authority to make recommendations for setting up of a single-window clearance system, no firm provision has been included for expediting the approval process,” it added.

ICRA also highlighted the existing ambiguity in the bill with respect to implication of bringing the real estate projects currently under construction under the ambit of the Bill.

The Real Estate Regulatory Bill 2016 moved one step closer to reality with the Rajya Sabha passing the Bill with unanimity on March 10, 2016, almost seven years after it was initially introduced by the Ministry of Housing and Urban Poverty Alleviation (MHUPA) as a Model Act in 2009. The Bill will now go to the Lok Sabha and then for Presidential Assent, before it becomes a law.

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