Will RERA hit supplies, push up home prices?

AHMEDABAD: Will RERA push property prices up? With Real Estate (Regulation and Development) Act, 2016 (RERA) coming into force from May 1, realtors see a short-supply, albeit temporarily, as new realty project launches will get delayed on account of stricter norms. The short-supply coupled with increase in construction cost is expected to push up property prices for short term, say experts and realtors.

“New project launches will get postponed as compliance will increase. With demand rising, delay in new project launches would result into temporary short supply,” said Jaxay Shah, president, Confederation of Real Estate Developers’ Associations of India (CREDAI).

Developers say that conversion of agriculture land into non-agriculture (NA) takes around 4-6 months. Then, development plan passing and environment clearance require three months each. After obtaining these permissions, developers will have to apply to state regulatory authority for registration, which will take maximum one month’s time. “If purchase a land today, it will take at least 10 months for me to launch project,” said a city-based developer.

“New project launches will be delayed mainly because developers will have to get all the permissions before they start selling. The demand in the market has picked up and if the supply does not match pace with demand, it will dry up the available stocks in the market. Short supply will naturally increase the prices of end products,” added Shekhar Patel, treasurer, CREDAI-National.

Industry players also expect the construction cost to go up as developers will have to deposit 70% of the money from investors and buyers into a separate account, which can used only for the construction of the project. “Developers also have to make full payments for purchasing land as they are required to have land agreement before registering their projects. Construction cost is expected to increase, which ultimately is passed on to consumers,” said a developer.

“Restricted supply in the wake of delayed project launches may increase property prices temporarily and will stabilise in longer run,” said Nirav Kothari, MD, Ahmedabad office, JLL, a leading property consultant.

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