Centre's realty Bill could make homes more expensive

Developers' cost would go up with the wait to get all approvals before starting project

The Real Estate (Regulation and Development) Bill, 2013, could push up the costs of operations for realty developers and make houses expensive, according to sectoral players.

According to the provisions of the Bill, developers cannot launch projects without getting all approvals from the authorities. Plus, they need to deposit 70 per cent of funds collected from buyers in a separate bank account.

While these provisions are meant to protect the interests of home buyers, realtors fear these could turn out to be a headache.

“The Bill says developers cannot launch project without getting all approvals,” said Pradeep Jain, chairman of Delhi-based Parsvnath Developers. “Without pre-sales, investor sales and so on, the holding cost of developers will go up. The end-consumer will have to bear every cost increase. Together with the land acquisition Bill and the real estate Bill, I believe housing prices will go up by 30-40 per cent.”

Sanjay Dutt, executive managing director of Cushman & Wakefield, said: “The Bill might  create an upward pressure on prices. There will also be some cost implications, as developers might have to wait to launch their projects with due approvals in place.”

Currently, developers sell apartments to investors at discounts ranging from 25-50 per cent, depending on the stage of the project, promising definitive returns irrespective of the state of the market. The earlier the stage, the more the discount.

“If realtors take six months to launch projects after getting approvals, their cost of funding will definitely go up. They say the authority will give permissions in 15 days. Which authority will give permissions in 15 days?” asked Ramesh Nair, managing director (west India) at property consultant Jones Lang LaSalle (JLL).

Developers also opined that the mandatory deposit of 70 per cent in a separate bank account is impractical. “If 70 per cent of funds are stuck in escrow account, how will developers grow their business?” said Nair. He added it would have a visible impact on new launches.

Lalit Kumar Jain, chairman of Confederation of Real Estate Developers Association of India (Credai), said: “The construction cost varies in different markets. For instance, in micro markets as in prime areas, the cost of construction may be around 30 per cent, whereas in suburban areas, it could be higher at 80 per cent of the entire cost elements.”