Realty regulatory bill to boost housing demand, cut delays

Housing demand will improve while delays in handing over the projects are likely to decline once the real estate regulatory law comes into force, according to research reports.
In the short-term, new project launches might fall and there could be an adverse impact on developers' margins, the reports said, adding that it would take another 9-24 months to implement this law.
The Real Estate (Regulation and Development) Bill, which was passed by Rajya Sabha yesterday, seeks to regulate the realty sector, bring in transparency and help protect consumer interests.
"The Act will improve buyer confidence and boost demand for residential real estate. It incorporates mandatory disclosure clauses, which would provide greater clarity on project standards and timelines for completion," Crisil Research said in its report.

While bringing stricter regulatory control for the developers, the Bill would translate into better demand as it would improve buyer's confidence.
"In terms of supply, delays in handover of projects are likely to decline as clauses mentioned in the Act mandate strong commitment from developers to complete the projects as per schedule," Crisil Research said.

Kotak Institutional Equities Research said in its report that it would take up to 24 months to implement this law.
"The government cleared another hurdle to bring transparency and discipline to the real estate sector. But, as land is a state subject, the Bill will have to be manoeuvred through the states that could take another 9-24 months before implementation," it added.

The bill also mentions retrospective application on projects, which is practically difficult to implement in many cases, Kotak said.
Motilal Oswal in its report said the proposed law could be a "pain of today for a better tomorrow".
"The Bill is a strong leap forward to induce transparency, accountability and standardisation, and consumers/investors' confidence by curbing unscrupulous practices," it said.
Pain will come from forced change in style of operations of many non-disciplined developers whose ability to attract buyers at discounted price amid lesser commitment to product quality and execution will be curbed, the report said.
Listing out near-term consequences, Motilal Oswal said there would be rise in cost of capital as surplus cash from project sales will be locked in.

There could be an adverse impact on margins as increase in cost of projects would have limited leeway to pass on given weak market dynamics.
Motilal Oswal said the new law would lead to consolidation in the industry. "Reduction in project launch in near-term till developers assimilate the framework," it added.