It will be some time before the real estate Bill's effects become visible: Sushil Syal

Interview with MD and CEO of Bharti Realty

The Real Estate Regulator Bill, 2016 is being hailed as a much-needed step to reform the real estate sector, besides being a shining example of cooperation between the government and the Opposition in Parliament. But while the Bill addresses the builder-buyer spectrum, it leaves out the red-tapism that developers have to work around. Sushil Syal, MD and CEO of Bharti Realty, speaks to Manavi Kapur about the various challenges that lie ahead. Edited excerpts:

How effective do you think the Bill would be in regulating the real estate sector?

The basic thrust of this Bill is to regulate the delivery of projects to home buyers. In terms of pricing, which is governed by circle rates, it will be difficult to monitor. Currently, one of the biggest woes of home buyers is the timely delivery of houses and this Bill provides them a legal safeguard for their investment. In its current form, the Bill addresses the builder-buyer spectrum, which is a welcome step, especially with regards to adding an element of transparency to the status of government approvals. But the Bill does not address any of the challenges that real estate developers face while being players in the realty sector.

Would this Bill increase bureaucratic hurdles for developers?

Builders would certainly face more red-tapeism now, especially when it comes to procuring relevant approvals. Developers have been demanding a single-window clearance from the government for a very long time now, but unfortunately, this Bill does not address that. And since the implementation of the Bill is up to the states, it leaves builders with greater chances of being harassed because of more bureaucratic procedures than before. Globally, the real estate business is also a regional one, especially because land laws are specific to each state and region. For those developers who want to diversify, an added layer of the regulator will make it that much harder.

The Bill also does not tackle the issue of defaulting buyers. There is a large investment that goes into a real estate project and without a financial recovery plan, it may make projects unviable.

Is the 70 per cent escrow stipulation for developers justified?

In the case of developers who operate in regions with low land prices, a 70 per cent escrow rule will not be very difficult to manage. But other mature real estate markets, especially hubs within cities that have high land prices, will make a project unfeasible with a 70 per cent escrow. For example, if the land price per square foot in South Delhi is Rs 30,000 and the selling price is at Rs 50,000, keeping 70 per cent of the project value in escrow will put a huge burden on the developer. Ideally, the escrow stipulation should have been linked to market prices and should have been made region-specific.

Without this Bill too, the government has certain regulations in place for developers to secure the interest of home buyers. What changes now?

So far, there wasn't complete transparency as far as government approvals were concerned and there were instances when projects were sold without adequate clearances. But now, buyers will invest in real estate projects with greater confidence. The key, though, lies in the enforcement of these rules. Each state will need to set up an agency to ensure that this Bill does what it is supposed to. There will be more clarity once the states come up with a plan to implement this Bill, which means that it will be some time before its effects become visible.