On completion of more than a month since the notification of RERA rules by the Karnataka state government and launch of the RERA portal, the real estate sector is slowly inching towards an organised future. Recently, the Karnataka RERA body announced that they received about 977 applications for registration of projects and about 273 for registration of real estate agents as of 24th August, 2017. The deadline for registration was also extended recently by one month, till 31 August, 2017. However, the numbers are much lower than the expected registrations as Bengaluru by itself has huge inventory of ongoing projects, and the number of agents are also on the higher side.
As per Colliers International’s research, the performance of Bengaluru’s residential market post RERA, in H1 2017, the city ranked second in total residential launches in India with about 13,400 new unit launches. The market faced a notable drop of 23% compared to H1 2016. Localities such as Yelahanka, Devanahalli, Ranchenahalli and Kogilu recorded the highest number of launches in the city. It was also noted that most of the new launches were in the mid-segment category catering to the higher demand from information technology employees of the city. Moreover, the strong office sector performance in Bengaluru indicated a healthy demand scenario for the residential sector in medium-to- long term.
“This is an unprecedented situation for all developers across India. Demonetisation has resulted in fundamental change in most of the developer’s approach towards their businesses and when RERA came into picture, they were forced to put their house in order. To make their existing projects RERA compliant, the developers were left with no band-width and had to take a pause before taking any further decisions related to new projects, thus leading to decline in number of new launches in Bengaluru” says Goutam Chakraborty, Senior Director, Office Services, Colliers International India.
In such a scenario, the notification of RERA and its stringent regulations have put additional pressure on the developers to get registered with the authority and to comply with the rules of the Act. Although many of the developers were proactive in registering their ongoing projects with RERA while the developers who failed to do so will be barred from advertising, marketing, booking, selling or offering for sale, or inviting persons to purchase in any manner in accordance with the Central RERA Act. This is applicable for any plot, apartment or building as the case may be in any real estate project or part of it in any planning area. We advise developers to avoid any further delays in registration of their projects as they will be liable for a penalty which may extend up to 10% of estimated cost of the real estate project or can also be punished with imprisonment terms, if the violation continues.
As per Colliers International’s research, the capital values in locations such as Central, Airport Road, Whitefield and Yelahanka recorded a 3%-6% decline in H1 2017 while off-central locations such as Jayanagar, Sadashivanagar, Bannerghatta and Koramangala witnessed a 1%-4% increase. We expect capital values to largely remain stable in short-to-medium term owing to the present skeptical situation in market post RERA.
In terms of residential sales, in spite of expected fall in the number of launches in upcoming quarters due to RERA implications, the mid-range segment will continue to drive sales as the festive season approaches in September and October. Various promotions by developers and attractive payment plans amidst a soft home loan interest rates environment will drive the residential sales in the market.
For developers, improved project planning, obtaining all necessary approvals on time and use of modern construction technologies to speed up the construction process will help developers to avoid delays, manage project funds efficiently and align themselves with all the RERA guidelines going forward.