Professional Documents
Culture Documents
Ekta Sawant-End of Real Estate Blues in India - Lex Hindustan Article Writing Competition
Ekta Sawant-End of Real Estate Blues in India - Lex Hindustan Article Writing Competition
* Summary:
The real estate market is the most preeminent topic of
discussion in the recent times. With the new real estate
regulations coming into force in India, the investors see a
ray of hope for their long drawn dreams to come true. The
main takeaways from this article shall include the insights
into the Real Estate (Regulation and Development) Act,
2016 along with the legal and investment issues pertaining
to the real estate sector.
Index
1
1. Introduction:
The real estate sector refers to development, sale
and purchase of land for residential and commercial
purposes. The real estate market is one of the most globally
recognized sectors. For the Indian population, the real
estate sector is a blessing, as it is one of the largest
employer. It is divided majorly into residential and
commercial real estate. Further, the real estate sector plays
an important role in providing adequate infrastructure for a
nation and thus, also includes hospitality and retail real
estate. The real estate market is progressing in leaps and
bounds and as per the India Brand Equity Foundation1, the
real estate market in India is expected to reach up to US $
180 billion by 2020. In the past decade, the growth in the
construction sector has almost doubled, from 5.69% in
2004-05 to 9.57% in 2009-102.
Factors such as huge population, rising income
level, increasing foreign investment and rapid urbanization
have contributed majorly towards the growth of the real
estate sector in India. The returns on investments in real
estate are more volatile than one can imagine. The research
conducted by the Forbes India states that Mumbai is the
most ideal destination for investment in real estate market
where the Colaba locality in the city of Mumbai earns on
an average 10 year return of 8.07% with the lowest being
2.09% (1996-2006) and the highest being 14.37% (2003-
a. Uniformity:-
The Act has uniform applicability throughout India, except
for the state of Jammu and Kashmir, to which the act in
general does not apply. All types of real estate projects
including commercial as well as residential real estate
projects, existing as well as upcoming real estate projects
are brought under one umbrella.9
b. Transparency:-
As per the Act, every State is required to establish RERA so
as to regulate the issues pertaining to the real estate sector
within its jurisdiction and formulate real estate regulation
and development rules which shall be binding on RERA of
the respective State. Also, RERA is authorized under the
Act to create a web based online system for submission of
application for registration of the prospective real estate
projects, within one year from the date of its
establishment10. Upon registration of the project, the
promoters are required to publish their prospectus along
with the registration number provided by RERA on the said
website.
9 Section 1(3) read with Section 2(zn) and Section 3 of the Act.
d. Auxiliary advantages:
Emergence of the Act, ensures that construction shall be
completed within the time stipulated by the developers. The
developers and the purchasers/ investors are equally
penalized for making default in completion of the project
9
4. Investment in Real Estate Sector:
Investment in the real estate market includes
purchasing, owning, managing, renting and/or selling real
estate for gaining profits and returns from such
investments. For investment in real estate, a thorough study
of the market is essential, otherwise, such investment may
become risky. It is pertinent to note that there is no straight
jacket formula for a safe investment in the real estate
market as there are many factors which are needed to be
evaluated before initiating such investments. Also,
liquidation of investment in real estate market is limited as
compared to other investments. In spite of such wimpy
conditions in the real estate sector, the Indian real estate
sector has witnessed high growth of investments in recent
times due to increase in demand for office as well as
residential spaces. The construction development sector in
India, as per the Department of Industrial Policy and
Promotion’s data, has received a whopping US $ 24.19
billion, Foreign Direct Investment in the period of April
2000 to March, 2016.
On the world map, India has marked its significance as
a land of opportunity for business and investment. In mid-
September 2015, Mr. Raghuram Rajan, Governor, Reserve
Bank of India, said that India is an island of relative calm in
an ocean of turmoil while the fellow BRICS (Brazil,
Russia, India, China and South Africa) have deep problems.
The recent government data is in affirmation with our
esteemed governor, which shows an economic growth of
7.4% in the second quarter of the current financial year.
10
The statistics have helped to position India on the global
market as an ideal investment destination which further
helps to improve India’s diplomatic and trade relation
globally. Even though the statistics showcase India as the
optimal investment destination, there is very little or no
guarantee for definite returns on real estate investments.
This is mainly because of the rise in the number of
fraudulent developers and also because of the minute
glitches in the acts governing the provisions for
investments in real estate.
11
5. Conclusion:
The Act has prepared the Indian real estate sector and
more particularly the developers to shift gears and accept
fresh challenges by responding to an increasingly well-
informed consumer base and acknowledging the rapid
globalization. One of the main reasons for increased
transparency between the developers and the investors is
the growing flow of FDI into the Indian real estate. In order
to attract more funding in the Real Estate sector, the
developers have revamped their accounting and
management systems so as to meet the due diligence
standards.14