Parliament Lockjam: Will Real Estate Regulatory Bill Ever See the Light?

K Ramanathan

The tall climes of steady upward growth are notwithstanding, the real estate sector in India, which is the second largest employment generator after agriculture, has been in doldrums for the last few years owing to economic downturn with developers looking for a ‘miracle’ which can turn the tide for the sector in 2016.

There have been a few positive developments in the recent past such as opening up of Foreign Direct Investment (FDI), introduction of REITs and recently, the cabinet passing the much-awaited Real Estate Regulatory Bill which have created positive vibes among the real estate community.

Though the success of the first two initiatives can be gauged on the basis of investment scenario, which again depends on the economic growth, the enactment of real estate regulatory Bill as law is expected to add the much required impetus to the sector’s growth vehicle in the year 2016, feel real estate experts. 

N. Nandakumar, President, CREDAI Tamil Nadu & Managing Director, Devinarayan Housing & Property Developments Pvt Ltd.

The Bill will become a reality as the Government has given great impetus to Real Estate (Regulation and Development) Bill (RERA).  It is only a matter of time before the Rajya Sabha clears the Bill and consequent adaptation by the State Governments in setting up the Regulatory authorities.  The transition time for this would take about 9 to 12 months and thereafter which, implementation is expected to commence.

The year 2015 has been a turbulent year for the Real Estate industry in India.  The market conditions being extremely volatile would have cascading impact for the immediate future. The Bill will bring the much needed push to the real estate sector’s growth.

Anil Pharande, Vice President, CREDAI Pune Metro and Chairman - Pharande Spaces
The Indian real estate sector has historically been unregulated and unorganized with the later having the largest share of the market. It is in this segment consumers face a lot of problems due to unscrupulous practices followed by ruthless developers. 

The Real Estate Regulatory Bill was conceived to give assurance and clarity to home buyers through various means. After several changes, it has now overcome the important hurdle. As an enforceable law post clearance, it will have a far reaching positive impact on both domestic and global investors. Most importantly, the independent regulators will give homebuyers a strong sense of assurance.

Anuj Puri, Chairman and Country Head at JLL India

The Real Estate Regulatory Bill has seen several changes in the recent past. The latest one, which has made amendments as per a Rajya Sabha committee, is expected to pass in the Upper House in the current session. 

The Bill, if becomes a Law after President’s assent, will provide the much needed boost to the sagging real estate sector and have far-reaching consequences in terms of operating procedures and creating transparency in consumer redressal system. If it happens, it will be a year-end bonus for the struggling realty sector. 

The Bill will bring in much-required accountability and transparency in the real estate sector. It will also guarantee consumer right protection, thereby increasing customers’ confidence and also aid improved quality and timely delivery of projects.

Surendra Hiranandani, Founder and Managing, Director of House of Hiranandani

The Real Estate Regulatory Bill should act as a level playing field between home buyers, builders and authorities. Though we believe that the proposed Bill will bring in transparency and protect consumers’ interests, the lack of clarity on certain proposed measures is likely to add the construction costs through delay. 

This will make the housing projects more expensive thus buying homes will become a distant dream for middle-class and poor.

Setting up of state-wise regulators, compulsory registration of all residential and commercial projects, enhancement of power to grievances cells will help regulate the sector further by bringing in a systematic approach and transparency.

With opposition parties headed by Congress making tough for the ruling NDA to pass Bills in the Rajya Sabha by bringing in various issues to adjourn the Houses repeatedly, several important bills such as GST, Real Estate Regulatory Bill, Prevention of Corruption Bill, Whistle-blowers Protection Bill, and many more are waiting endlessly to see the light. 

Will these parties rise above the petty politics and help nation building by doing some serious works at the Parliament? Only time will tell!

The article also published in Merinews.com.

For The Lack Of A Road…

Pune has an advantage by virtue of the fact that it has been able to add to its borders by means of surrounding villages. This has served to decrease the pressure on the central city and encouraged an outward growth pattern, writes Anil Pharande, Chairman – Pharande Spaces & Vice President – CREDAI (Pune Metro).

There are often comparisons made between the infrastructure of Mumbai and Pune. The popular consensus seems to be that both cities are equally challenged as far as supportive infrastructure is concerned. This is inappropriate for two reasons – one, Mumbai’s growth pattern has been very different from Pune’s. 

The city has evolved into the country’s financial capital, and the pressures on it are enormous and overwhelming, considering the fact that a significant part of it is an island that cannot grow horizontally to accommodate the growing real estate demands.

Pune, on the other hand, has an advantage by virtue of the fact that it has been able to add to its borders by means of surrounding villages. This has served to decreased pressure on the central city and encouraged an outward growth pattern. 

The challenges on Pune’s infrastructure – particularly its road network - have more to do with the speed of this growth. While there are various proposals for roads and road widening, these have to be translated into real time to be effective.

The pockets of infrastructural under-development are the result of both developers and the Government concentrating on existing growth areas and sidelining those with high future potential. It is a known fact that no area can grow in terms of residential, commercial and retail real estate unless the necessary infrastructure is first put in place.

This is quite a common phenomenon that is the result of the principle of fastest returns almost instinctually followed by both developers and the Government. Bangalore, for instance, was initially not well planned for radial expansion. The approach in this city was simple – where Information Technology projects went, residential projects followed. IT and ITeS, as business lines, are not dependent on a city’s CBD areas and can workably exist in areas where property prices are low.

Once such a project is established, residential, commercial and retail establishments follow. Since this kind of growth in no way follows a master plan, the result is haphazard pockets of growth. This naturally leads to the neglect of areas that have not been so favoured. The syndrome is also evident in the case of other industries such as manufacturing.

To identity another factor that has compromised Pune’s holistic growth in terms of real estate viability - the first masterplan for the city designated a much more progressive ‘roadmap’ for the city’s road network. However, even today, key roads leading to new growth areas are not being put in place with the speed necessary to ensure that these new areas have the requisite connectivity.

In comparison, the Pimpri Chinchwad Municipal Corporation (PCMC) has been proactive in terms of a proper road network. This explains why there have been such spurts in growth and corresponding real estate values in this region. Even within Pune, there were earlier precedents wherein languishing areas were given fast-paced infrastructure upgrades because of an new market catalyst. For instance, the Youth Commonwealth Games brought with them the fast-tracked enhancement of Baner Road and Pashan Road.

New Real Estate Mantra - Integrated Residential Projects

Land constraints, zoning laws and the budgetary considerations that govern property buyers in many areas often do not make the integrated township model feasible, opines Anil Pharande is Vice President - CREDAI (Pune Metro) and Chairman of Pharande Spaces.

When you are setting out to purchase the home you always dreamed of and saved for, you obviously wanted something more than just an orphaned, anonymous set of walls in some congested city center. The problem is that’s all that most residential projects in India offer these days.

There is a lot more to the perfect home than good construction, layout and fittings – a residential property needs supporting social and physical infrastructure to become a suitable home. Moreover, the beleaguered city dweller’s heart yearns for the sight of greenery, open spaces and fresh air.

After all, we want our children to grow up in better conditions than we possibly experienced at their age…

In Pune, integrated townships have been seen as the answer to these requirements. However, land constraints, zoning laws and the budgetary considerations that govern property buyers in many areas often do not make the integrated township model feasible. A more practical and feasible alternative is Integrated Residential Projects. 

What Are Integrated Residential Projects?

Like integrated townships, this more compact and serviceable model offers home buyers everything they need for a comfortable and healthy lifestyle. Children have enough room to play in, and both they and their parents are free from the stress, noise and pollution of central urban life. Such projects have schools, shopping and entertainment facilities, healthcare and easy access to public transport.

Also (very importantly) they are a boon to people who wish to live in a non-urban environment while attending to their jobs in the workplace catchments of the city. They get a dream location, excellent infrastructure and a lot more.

Residential real estate investors, on their part, can capitalize on the higher demand – and therefore the higher ROI (returns on investment) that such properties offer. The higher investment potential of homes in integrated residential projects stems from the fact that they are self-sufficient and self-sustaining. A direct outcome of this is that the resale value of such properties is as good as immune to market volatility. Because of the diversified nature of such projects, they represent a very low risk to property investors, even while they benefit from the larger upside potential despite low entry costs.

Unique Challenges For Developers

Builders who cater to the demand for integrated residential projects face quite few challenges. After all, they have to provide the advantages of integrated townships while having to forgo the considerable incentives that the Indian Government offers for the development of larger townships. Therefore, the initial capital required is extremely steep – right from land acquisition to the providing of physical and social infrastructure.

The integrated residential project concept is just beginning to emerge on the Indian real estate landscape. One of the areas where it has been successfully implemented is Pune’s sister city – the Pimpri Chinchwad Municipal Corporation. One of the primary reasons for the success of the integrated residential projects in the PCMC areas of Pradhikaran and Ravet is the fact that these are located very close to vital workplace hubs such as the MIDC and Hinjewadi, Pune’s software hub. This, coupled with the advantages of having ‘everything inside’, has contributed to the demand for homes in such projects.

How Road Connectivity Leads To Real Estate Growth

Most property brokers will make a big case out of an area's excellent road network and how this improves the appreciation value of a proposed property. But how exactly does this phenomenon work? What is the real 'connection' between better roads and better real estate values? Anil Pharande, Chairman - Pharande Spaces & Vice President - CREDAI Pune Metro, discusses how road connectivity helps the real estate growth.

Fundamentally, the creation of major roads reduces vehicle travel by cutting down the distance that needs to be traveled between destinations. This has a direct effect on residents in connected areas. With shorter distances, people can comfortably choose to travel public transport or two wheelers, thereby cutting down fuel expenses. This also decreases noise and air pollution in residential areas.

Improved road connectivity also improves the overall safety of a neighbourhoods. This is because it becomes easier for emergency services such as fire brigade and ambulances to reach them. Likewise, it is possible for residents to reach hospitals faster - this can sometimes make a difference between life and death.

Such an undertaking is also a blessing for employees working in the area's numerous manufacturing and service industries. In Indian cities, the amount of time it takes to get to and from one's workplace is an extremely important consideration. By allowing the residents of connected neighbourhoods to reach and return from their workplaces faster, the amount of time they can spend with their families increases significantly. The same paradigm applies to school-going children.

The Health 'Connection'

Reduced travel time also reduces the incidence of various physical ailments as well as stress levels. Longer travel times give rise to higher exposure to traffic pollution and extreme climate. Several serious health problems such as deep vein thrombosis and lung infections have been directly linked to extended automobile travel on a regular basis.

Similarly, road rage and reckless driving are often the direct result of the traffic congestion caused by insufficient road linkages. Also, as road connectivity improves further, the shorter travel distances can encourage the use of health-positive travel modes such a bicycles.

The Personal Finance 'Connection'

Ever-increasing fuel prices were once a concern only to the middle class - today, they have gone so high that even the more affluent classes are feeling the heat. Electric cars that can meet the travel requirements of a normal-sized family are still a distant dream. We hear that Tata Motors is developing a air-powered car, but it is unlikely that we will see such solutions on the roads for several more years to come. In the mean time, like it or not, we are dependent on fossil fuel-driven vehicles.

The magnitude of savings that are possible because of improved road connectivity must not be under-estimated. It is a known fact that the transportation expenses of residents in well-connected areas is lower; a lesser-known fact is that communities which live in areas without good road connectivity often spend between 10-15% of their monthly income on transportation alone. The figures rises proportionately to the number of vehicles the family operates.

The Real Estate 'Connection'

These are the reasons why road connectivity has such a massive impact on real estate prices. Simply put, there is a higher demand for homes in well-connected areas because they equal an easier, safer, healthier and more cost-effective way of life. In this context, the arrival of the PCMC Spine Road has become a game-changer for the region's real estate market.

For example, the Spine Road is a monumental contribution to the PCMC real estate sector by the Pimpri Chinchwad New Township Development Authority (PCNTDA). This becomes evident when we study the benefits that this massive infrastructure initiative brings with it. The Spine Road is the latest initiative by PCNTDA's focus on location-efficient development.

The PCMC Spine Road connects two major highways and provides an access focus for the residential, commercial and industrial centres in the PCMC. As the longest stand-alone road within the PCNTDA limits, it is a significant step forward in relieving traffic congestion on internal roads. It also features six lanes with cycle tracks, service roads and parking facilities, thereby vastly improving the quality of living for all residents living along its perimeter.

The investment value of residential properties along the Spine Road has not been lost on investors, who are now making a beeline to residential developments in Moshi, which is one of the most prominent areas along this road.

Naiknavre becomes Credai-Pune Metro chief

PUNE: Hemant Naiknavre, director of Naiknavre Developers, was named the new president of Confederation of Indian Real Estate Developers' Association (Credai) Pune Metro - an apex body of private realtors and builders of Pune.

Credai Pune Metro, in a statement, said that Naiknavre was elected unanimously at their core committee members' meeting on Friday.

The meeting also elected as vice-presidents Shantilal Kataria of Aditya Builders, Rohit Gera of Gera Development Pvt Ltd, Anil Pharande of Pharande Promoters and Builders, Shrikant Paranjape of Paranjape Schemes Constructions Ltd, Suhas Merchant of Kalpataru Properties Pvt Ltd and Kishore Pate of Amit Enterprises Housing Ltd. Anuj Bhandari of B U Bhandari Landmarks was named secretary, while Nitin Nyati of Nyati Builders Pvt Ltd was elected treasurer and Atul Goel of Goel Ganga Constructions as the joint secretary.