PROJECT REPORT ON

“IMPACT OF RERA ON HOUSING LOAN INDUSTRY”

In partial fulfillment of the Requirements for the award of the degree of

MASTERS OF BUSINESS ADMINISTRATION

(RETAIL MANAGEMENT)

(2018-2020)

Submitted By :

Puneet Jain

21005

MBA (Retail Management)

UNIVERSITY INSTITUTE OF APPLIED MANAGEMENT AND SCIENCES

PANJAB UNIVERSITY, CHANDIGARH

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DECLARATION FROM THE CANDIDATE

I, Puneet Jain student of MBA (Retail and Management ) Roll No. 21005 do hereby certify

that the Project work titled Study on IMPACT OF RERA ON HOUSING LOAN INDUSTRY is a

bonafide work carried out by me.

Signature of the candidate…………………………….

Name: Puneet Jain

Class: MBA Retail Management

DATE: PLACE: Chandigarh

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 ACKNOWLEGDEMENT

I take this opportunity to express my deep sense of gratitude, thanks and regards towards
all of those who have directly or indirectly helped me in the successful completion of this
project.

I present my sincere thanks to Mr. Satinder Singh (National Head- Rural Housing Finance) for
valuable guidance, generous help and constant enthusiastic inspiration.

I want to express my special gratitude towards DR. AMANDEEP SINGH MARWAHA, (Training
& Placement Officer), UIAMS, Punjab University, Chandigarh for providing the opportunity.

Last but not the least I am indebted to my parents who provided me their time, support and
inspiration needed to prepare this report.

EXECUTIVE SUMMARY
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Housing has often been called the “Engine of Domestic Growth” of the Economy. Housing
finance acts as a bridge to provide financing and open up the housing market to aspiring
home owners. The objective of the project is to analyze impact or RERA on housing loan , its
scope and government initiatives launched. The study will help in relating affordable
housing segment to multi sector linkages and its impact on Indian economy, to know the
benefits of policy “Housing for all by 2022” for developers as well as buyers.

The project will cover areas of the untapped market in affordable housing segment and its
recent trends in affordable housing. The reforms initiated in Real Estate Act, 2016 and other
government reforms in affordable housing segment. The project covers builder’s
perspective of affordable housing segment after government initiatives and future prospects
of affordable housing segment.

The project will help in analyzing the growth of Affordable housing as a segment. It will help
in analyzing the awareness regarding the scheme and benefits derived from the scheme.

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 TABLE OF CONTENT

S. CHAPTERS Page
No. No.

1 INTRODUCTION 6-15

2 RERA ACT 15-18

3 COMPANY PROFILE 19-26

4 CONCEPTUAL FRAMEWORK 27-33

5 REVIEW OF LITERATURE 34-37

6 RESEARCH METHODOLOGY & LIMITATIONS 37-38

7 RESULTS & DISCUSSIONS 38-47

8 FINDINGS & RECOMMENDATIONS 48-50

9 CONCLUSION 50-51

10 REFERENCES 52-54

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 INTRODUCTION

REAL ESTATE SEC TOR

The real estate sector is one of the most globally recognized sectors. In India, real estate is
the second largest employer after agriculture and is slated to grow at 30 per cent over the
next decade. The real estate sector comprises four sub sectors - housing, retail, hospitality,
and commercial. The growth of this sector is well complemented by the growth of the
corporate environment and the demand for office space as well as urban and semi-urban
accommodations. The construction industry ranks third among the 14 major sectors in
terms of direct, indirect and induced effects in all sectors of the economy.
It is also expected that this sector will incur more non-resident Indian (NRI) investments in
both the short term and the long term. Bengaluru is expected to be the most favoured
property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa,
Delhi and Dehradun.

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India's rank in the Global House Price Index has jumped 13* spots to reach the ninth
position among 55 international markets, on the back of increasing prices in mainstream
residential sector.

The Indian real estate market size is expected to touch $180 billion by 2020. The housing
sector alone contributes to 5-6% of the country’s GDP. Retail, hospitality and commercial
real estate are also growing significantly, providing the much-needed infrastructure for
India’s growing needs.

With property boom spreading in all directions, real estate in India is touching new heights.
However, the growth also depends on the policies adopted by the government to facilitate
investments mainly in the economic and industrial sector. The new stand adopted by Indian
government regarding foreign direct investment (FDI) policies has encouraged an increasing
number of countries to invest in Indian Properties.

India has displaced US as the second-most favored destination for FDI in the world. As the
investment scenario in India changes, India which has attracted more than three times
foreign investment .

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FACTORS INFLUENCING THE PRICE AND COST OF THE REAL ESTATE:

1. The physical characteristics of the property

2. The property rights

3. The time horizon of holding the property

4. Geographical area

5. The development rate

In particular, the unique features of the real estate market must be accommodated. These
include:

• Durability

• Heterogeneous

• High transaction costs

• Long time delays

• Both an investment good and consumption good

• Immobility

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MORE ABOUT RESIDENTIAL SEGMENT

The residential market was going through a bearish phase in 2017 due to the impact of
policy disruptions such as demonetization, Real Estate (Regulation and Development) Act
(RERA) and implementation of the Goods and Service Tax (GST). These initiatives resulted in
a decline in residential sales and launches across cities. With the impact of these policy
initiatives subsiding in 2018, new launches and sales inched upwards with a y-o-y increase of
about 15% in new supply and 13% in sales. While the recovery was at site, towards the end
of 2018, a liquidity crisis in NBFCs - a leading source of funding for residential developers,
resulted in fund crunch for the developer community. However, the government/RBI have
been proactive in ring-fencing the NBFC liquidity crisis and at the same time, the GST council
has slashed GST rates on housing units to spur demand.

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Policy measures and its impact on residential sector in 2018:

Policy Key Highlights Current status

Real Estate RERA was aimed at More than 26 states and UTs have
Regulatory Act ensuring accountability notified rules under the RERA and more than
(RERA) and infusing transparency 20 states have their websites operational
and uniformity in practices under the provisions of RERA.
prevalent in the real As on December 2018, more than
estate sector. 34,000 RE projects have been registered
under the RERA.

GST rate cuts GST Rates (Non-Affordable Having a standard tax will allow for simplicity
Housing) - 5% on under- in compliance processes and should result in
construction properties limited tax leakages. There could be an
with no input tax credit increase in cost due to no ITC for developers,
(ITC), no GST on however this could be offset by an increase in
completed projects. sales volume.

Affordable The government relaxed Revisions in GST rate were

Housing carpet area norms undertaken in Feb 2019. The GST rate is
multiple times for down from 8% to 1% on under-construction
affordable housing properties (subject to no ITC). Also, as
incentives. GST relaxations previously, there is no GST on completed
were also made. projects.
 Area relaxations for affordable
housing were also undertaken in Feb 2019.
Affordable housing now includes units upto
60 sq. m. in metropolitan cities (NCR
including Delhi, Noida, Greater Noida,
Ghaziabad, Gurgaon and Faridabad),
Bangalore, Mumbai – MMR region, Chennai,
Hyderabad and Kolkata) having value up to
INR 4.5 million.
 For non-metropolitan cities / towns,
units upto 90 sq. m with value up to INR 4.5
million have been included in the affordable
housing category.

Insolvency and The inadequacy of RERA to Home buyers have been recognized

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 Bankruptcy address the concerns of as financial creditors which treats them at par
Code home buyers in case of with the financial institutions to receive their
Amendment corporate insolvency has share in case of insolvency proceedings.
(IBC), 2018 led the central The amendment is also is in sync with
government to amend the RERA, in case of any delay from the
law. developer, allottee has the right to demand
for refund of the entire amount with interest.

 THE SUPPLY-DEMAND CONUNDRUM:

WHAT TO EXPECT IN 2019-2020 – SUPPLY TO IMPROVE

As developers align themselves with structural policy reforms implemented in the past few
years and with changing characteristics of demand, we can expect residential supply to
improve in 2019. The residential market is better placed this year as speculation-led
investment activity has reduced significantly and financial checks are in place to prevent
over-gearing. In terms of segments, mid-end projects will still garner the major chunk of
supply, followed by the affordable segment (owing to government incentives and increase in
end-user demand).

However, the NBFC liquidity situation may still pose an impediment to this recovery, since a
number of NBFCs have a significant proportion of their loan books exposed to developer
funding. A significant portion of these funds have been parked in projects in far flung,
peripheral locations, with relatively weaker demand.

In the wake of this liquidity tightening, most NBFCs are expected to exert caution, with focus
being on funding quality projects rather than only balance sheet expansion.

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Figure : Supply demand dynamics

DEMAND TO BE STRONGER IN 2020, MID / AFFORDABLE HOUSING TO LEAD

The year 2018 witnessed demand inching past supply, resulting in a dip in unsold inventory
levels. The confidence level of end-users and fence sitters was also relatively higher than
previous years. However, with the implementation of the GST and the confusion
surrounding the transfer of ITC from developers to homebuyers, the appetite for completed
developments was much higher; even though they form a miniscule proportion of the
unsold inventory. With the government announcing GST rate cuts for residential properties
in Feb 2019, the GST taxation gap between an under-construction and completed property
has been narrowed (from an end-user perspective), and this could result in a pick-up in
demand for under -construction properties as well. On the other hand, incentives for
affordable housing coupled with lower GST rate has increased demand for this segment, a
trend which is expected to continue in 2019 as well. At their end, developers will try and
stoke this demand by rolling up schemes and incentives.

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 MAJOR TRENDS TO LOOK OUT FOR IN 2020: APPROPRIATE LOCATION, RIGHT SIZING &
PRICING TO DRIVE THE SECTOR

Supply to be concentrated in the mid and affordable segments: As we expect the market to
witness a turnaround, developers will be concentrating on the mid and affordable segments
and be cautious about location and launches. The first half of the year is expected to be
stable with central and few state elections around the corner, but the second half is
expected to witness an increase in launches. Limited traction is expected in the premium
and luxury segment.
Demand to be strong for the right product: Demand will also remain concentrated in the
affordable and the mid end segments. Projects which are launched in locations with
developed physical and social infrastructure in place are expected to see greater traction in
the coming year. As delivery capabilities and balance sheets of developers have come into
greater focus, buyer preferences have shifted towards better quality and branded
developments.

 Credible players to enter affordable housing: We expect more large-scale

developers to enter this sector owing to government incentives, increased funding avenues
due to infrastructure status and improving demand from buyers. Most of the launches in
this segment are expected to be concentrated in the peripheral locations of tier I cities and
in tier II and III cities, where the sizes of units are comparatively bigger.
 Asset pricing to remain steady, albeit in key locations: Pricing will be one of the key
factors for projects to be successful. With limited speculative buying, developers will be
cautious with pricing, resulting in stable capital values in 2019. To sustain the sales
momentum, developers are expected to be flexible with the payment terms by offering
subventions schemes. These schemes along with easier funding options is expected to
improve sales in the coming year.
 Consolidation expected, share of larger players to increase: Fragmentation in the
sector, not only at a national level but also at a city level. Reforms such as RERA have
resulted in accelerated consolidation. The impact of the NBFC funding crunch and
implementation of GST and Insolvency and Bankruptcy Code is expected to impact the
smaller and mid-sized developers who are over-leveraged. Developers with a scalable

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 business model are better placed to increase their market share in a regulatory environment
that demands greater accountability and transparency.
 Increasing investment in land: There was an uptick in land transactions by
developers in 2018, with about 34% of all investments concluded during the year
concentrated in land or development sites; up from about 28% in 2017. Also, more than half
of the land deals witnessed in 2018 are proposed to be developed as mixed-used /
residential projects. This shows that investor focus still remains on the residential sector,
and we can expect more development activity in the coming year or so.
 Increased participation of private equity investors: Currently, debt structures
dominate the fund inflows in residential markets. Most developers are over-leveraged, but
with RERA, a conducive environment for the return of equity participation has been created.
 Emergence of alternate assets: With an increasing millennial population which
contributes to one fourth of the overall working population in India, their need for housing
is slightly unique. They look for convenience, service and a frictionless experience while
leasing a residential property. Investors are tapping this unexplored segment to cater to the
demand; including co-living, student and senior housing options.

HOUSING FINANCE LOAN

A home equity loan is a type of loan in which the borrower uses the equity of his or her
home as collateral. The loan amount is determined by the value of the property, and the
value of the property is determined by an appraiser from the lending institution. Home
equity loans are often used to finance major expenses such as home repairs, medical bills, or
college education. A home equity loan creates a lien against the borrower's house and
reduces actual home equity.

Most home equity loans require good to excellent credit history, reasonable loan-to-value
and combined loan-to-value ratios. Home equity loans come in two types: closed end
(traditionally just called a home-equity loan) and open end (a.k.a. a home-equity line of
credit). Both are usually referred to as second mortgages, because they are secured against
the value of the property, just like a traditional mortgage.

Home equity loans and lines of credit are usually, but not always, for a shorter term than
first mortgages. Home equity loan can be used as a person's main mortgage in place of a

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traditional mortgage. However, one cannot purchase a home using a home equity loan, one
can only use a home equity loan to refinance. In the United States until December 31 2017,
it was possible to deduct home equity loan interest on one's personal income taxes. As part
of the 2018 Tax Reform bill[2] signed into law, interest on home equity loans will no longer
be deductible on income taxes.

There is a specific difference between a home equity loan and a home equity line of credit
(HELOC). A HELOC is a line of revolving credit with an adjustable interest rate whereas a
home equity loan is a onetime lump-sum loan, often with a fixed interest rate. With a HELOC
the borrower can choose when and how often to borrow against the equity in the property,
with the lender setting an initial limit to the credit line based on criteria similar to those
used for closed-end loans. Like the closed-end loan, it may be possible to borrow up to an
amount equal to the value of the home, minus any liens. These lines of credit are available
up to 30 years, usually at a variable interest rate. The minimum monthly payment can be as
low as only the interest that is due. Typically, the interest rate is based on the prime rate
plus a margin.

Real Estate Regulation and Development Act, 2016 (RERA)

The real estate sector has been one of the top-most contributors to the country's Gross
Domestic Product (GDP) and employment creation. Surprisingly, inspite of being such an
important part of the economy, the real estate sector was unregulated for numerous years.
In order to regulate the aforesaid unorganized sector, the Indian Parliament passed a
legislation called as The Real Estate (Regulation and Development) Act, 2016 ("RERA") which
was made effective on May 1, 2016.

Government of India has been making conscious efforts at the policy front for creating an
enabling environment to overcome the challenges in the real estate sector. The RERA, 2016,
which is expected to increase transparency and accountability in the sector, has finally
become a reality. It is anticipated that accountability would lead to higher growth across
the real estate value chain, while compulsory disclosures and registrations would determine
transparency. These two aspects are likely to lead to higher efficiency.

Need of Real Estate Bill 2016

• Buyers holding back money due to lack of confidence in the Indian real estate market.

• Buyers avoid getting into legal battles with developers.

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• Projects being endlessly delayed and possession not given on time.

• Builders not compensating for delayed possession, but levying penalties on buyers for
delayed payments.

• Arbitrary changes in layout plans and the actual construction turning out to be different
from the advertised project.

• Land Hoarding: Money collected for one project being diverted to fund other projects or
buy different lands. It results in scarcity of land and hence escalates land prices.

Registration under RERA

One of the salient features of RERA is the requirement of registration of the real estate
project by the 'Promoter' with the Real Estate Regulatory Authority ("Authority"), which falls
within the planning areas. In the absence of such registration, the Promoter of a real estate
project is not permitted to advertise, market, book, sell or offer for sale, or invite persons to
purchase in any manner in any real estate project or part of it.

In terms of Section 3 of RERA, the following real estate projects are not required to be
registered:

1. Where the area of the land does not exceed 500 square meters or number of apartments
does not exceed 8 (eight);

2. Where the Promoter has received completion certificate for a real estate project prior to
commencement of RERA; and

3. Where the work involved is limited only to renovation or repair or re-development and
does not involve marketing, advertising, selling or new allotment of any apartment, plot or
building.

In addition to the registration of real estate projects, every Real Estate Agent is also required
to get itself registered before facilitating the sale / purchase of any real estate project or
part of it, by making an application along with requisite information / documents and fee.

Dispute Settlements

• The bill seeks to establish fast track dispute resolution mechanisms through adjudicating
officers and Appellate Tribunal.

• It bars civil courts from taking up real estate matters. However, consumer courts are
allowed to hear such matters.

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Penalties

• If promoter does not register his property: Penalty up to 10% of the project cost.

• If promoter dodges order issued by the RERA: Imprisonment for up to 3 years, and/or an
additional fine of 10% of the estimated project cost.

• If promoter provides false information: Penalty up to 5% of the estimated project cost.

• If promoter violates any other provision of the act: Penalty up to 5% of the estimated
project cost.

• Fine for the agents is INR 10,000 per day during the period of violation of provisions

Lending by Financial Institutions / Banks

In the event, any bank / financial institution decides to lend money to retail buyers under
the real estate project, which is not registered or registration of the same has been
cancelled, such decision may be a conscious call on the part of such bank / financial
institution since such lending will involve high risk factors and uncertainties regarding the
completion of the real estate project or actions to be taken by the Authority in relation to
such real estate project / Promoter at a later stage, which may be detrimental to the
interest of such bank / financial institution or other stakeholders. Hence, the Banks /
Financial Institutions have also been insisting upon registration of real estate projects under
RERA before sanction of the loan or approval of the real estate project in order to protect
their interest.

BENEFITS OF RERA

• Initial backlog

• Increased project cost.

• Tight liquidity.

• Rise in cost of capital.

• Consolidation.

• Increase in project launch time.

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Initially, a lot of work is to be done to get the existing and new project registered. Details
such as status of each project executed in last 5 years, promoter details, detailed execution
plans, etc., needs to be prepared.

With the advent of RERA, specialised forums such as the State Real Estate Regulatory
Authority and the Real Estate Appellate Tribunal, will be established for the resolution of
disputes pertaining to home buying and the aggrieved party will have no recourse to other
consumer forums and civil courts, on such matters.

While the RERA sets the groundwork for fast-tracking dispute resolution, the litmus test for
its success, will depend on the timely setting up of these new dispute resolution bodies and
how these disputes are resolved expeditiously with a degree of finality.

A batch of writ petitions was filed by real estate developers and individual plot owners in
the Bombay High Court. They claimed that RERA is unconstitutional as its state-wise
implementation and appointing state-level authority is arbitrary. They also challenged
Section 3 of the RERA which mandates developers to register their new and ongoing real
estate projects.

RERA is a central legislation though land is a state subject on which only the state
government is empowered to frame laws. Hence, RERA being a central legislation, is
adopted by each state government in India in its respective state assembly and has also
framed its respective rules and regulations to implement RERA in its territory.

COMPANY PROFILE

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Housing Development Finance Corporation (HDFC) is the housing finance company in India
which is registered and governed by National Housing Bank.

HDFC was incorporated in the year 1977 on October17, under the chairmanship of H.
Parekh with the primary objective of meeting a social need of encouraging home ownership
by providing long-term finance to households. Over the last four decades, HDFC has turned
the concept of housing finance for the growing middle class in India into a world-class
enterprise with excellent reputation for professionalism, integrity and impeccable service. A
pioneer and leader in housing finance in India, HDFC has assisted more than 6 million
customers to own a home of their own. HDFC is how millions of Indian families spell the
word 'Home' as the brand not only offers Housing Finance, but also Total Housing Solutions.

HDFC has a wide network of 474 interconnected offices (which includes 148 offices of
HDFC's wholly owned distribution company HDFC Sales Private Limited) catering to over
2,400 towns & cities spread across the country. It also has offices in Dubai, London and
Singapore and service associates in the Middle East region, to provide housing loans and
property advisory services to Non-Resident Indians (NRIs) and Persons of Indian Origin
(PIOs)

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 Maintain low
Consistently grow Gross Non-
the loan book. Performing Assets
(NPAs)

Increase the Maintain a low

Return On Equity cost to income
each year in order ratio by improving
to maximise It's operational
shareholder value. Growth efficiency.

Strategie
s

LEADERSHIP

Mr. Keki M. Ms. Renu Sud

Mr. Deepak S. Mistry (Vice Karnad
Parekh Chairman and
(CHAIRMAN) Chief Executive (Managing
Officer) Director)

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PRODUCTS AND SERVICES

Mortgage

The company provides housing finance to individuals and corporate for purchase and construction of
houses. It is one of the largest providers of housing loans. In its Annual Report for financial year
2012-13, the company has disclosed that it has disbursed approx. INR 456,000 crores in 35 years of
its existence for a total of 4.4 million housing units.

Life insurance

The company has been providing life insurance since the year 2000, through its subsidiary
HDFC Standard Life Insurance company Limited. It offers 33 individual products and 8 group
products. It uses the HDFC group network to cross sell by offering customized products.

General insurance

The company offers general insurance products such as:

 Motor, health, travel, home and personal accident in the retail segment which
accounts for 47% of its total business and
 Property, marine, aviation and liability insurance in the corporate segment.

Mutual funds

HDFC provides mutual fund services through its subsidiary HDFC Asset Management
Company Limited. The average Assets Under Management (AUM) of HDFC Mutual Fund for
the quarter Jul-13 to Sep-13 was INR 1.03 trillion.

Operations

HDFC's distribution network spans 396 outlets (including 109 offices of HDFC's distribution
company HDFC Sales Private Limited) which cater to approx. 2,400 towns and cities spread

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across India. To cater to Non-Resident Indians, HDFC has offices in London, Singapore
and Dubai and service associates in Middle East countries.

Home loans are also sourced through HDFC Sales, HDFC Bank Limited and other third
party Direct selling Agents (DSA).

MAJOR SUBSIDIARIES OF HDFC LTD

HDFC’s key associate and subsidiary companies include the following:

1. HDFC Standard Life Insurance Company Limited

2. HDFC ERGO General Insurance Company
3. HDFC Property Ventures LTD
4. HDFC Credila Financial Services
5. HDFC Sales Private ltd
6. HDFC Venture Trustee company ltd
7. HDFC Holding ltd
8. GRIHA PTE ltd
9. GRIHA Investment ltd
10. HDFC education and development services private ltd
11. HDFC pension management co. ltd
12. HDFC international life and re co. ltd
13. HDFC capital advisor ltd
14. HDFC ventures capital ltd
15. GRUH finance ltd
16. HDFC investments ltd
17. HDFC Trustee co. ltd
18. HDFC Asset management co. ltd

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ASSOCIATE COMPANIES:

1. HDFC Bank
2. Magnum foundation Private Ltd.
3. True North Ventures Private Ltd.

LISTINGS AND SHAREHOLDINGS:

Listing:
The equity shares of HDFC are listed on Bombay Stock Exchange where it is a constituent
of the BSE SENSEX index, and the National Stock Exchange of India where it is a
constituent of the S&P CNX Nifty.

Shareholding:
On 30 September 2013, 73.09% of the equity shares of the company were owned by the
Foreign Institutional Investors (FII). Around 185,000 individual public shareholders own
approx. 9.25% of its shares. The remaining 17.66% shares are owned by others.

Employees
As of 31 March 2013, the company had 1,833 employees, out of which 22% were
women. The company incurred INR 5.28 billion on employee benefit expenses for the
financial year 2012-13.
Employee productivity: For FY 2012-13, the company reported a per employee profit of
US$ 489,000 and per employee assets of US $18.5 million.
Centre for Housing Finance: HDFC’s Training Centre is located in Lonavla, Mumbai and it
was established in 1989. It is mainly used for training programmers, workshops,
conferences and strategy meetings.

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 HOME LOANS (NEW HOMES)

 Loans for purchase of:

 A flat, row house, bungalow from private developers in approved projects.

 Properties from Development Authorities such as DDA, MHADA etc.

 Attractive interest rates that make your Home Loan affordable and easier on your
pocket.

 Customized repayment options to suit your needs.

 No hidden charges.

 Expert legal and technical counseling to help you make the right home buying
decision.

 Integrated branch network for availing and servicing the loan anywhere in India.

Special arrangement with AGIF for Home Loans for those employed in the Indian Army.

LOAN ESSENTIALS

Who Can Apply

You can apply individually or jointly for Home Loans. All proposed owners of the property
will have to be co-applicants. However, all co-applicants need not be co-owners. Generally
co-applicants are close family members.

Loan Term
 The maximum period of repayment of a loan shall be up to 30 years for the Telescopic
Repayment Option under the Adjustable Rate Home Loan. For all other Home Loan
products, the maximum repayment period shall be up to 20 years.

 The tenure of the loan is also dependent on the customer’s profile, age of customer at
maturity of loan, age of property at loan maturity, depending upon the specific repayment

24
scheme as may be opted and any other terms which may be applicable based on prevalent
norms of HDFC.

Maximum Loan Amount

LOAN MAXIMUM FUNDING

AMOUNT( Rs)

Upto& Including 90% of the cost of property

Rs30 lacs

Upto 75 lacs 80% of the cost of property

Above 75 lacs 75% of the cost of property

DOCUMENTS

Following are the documents you would need to submit for all applicants / co-applicants
along with the completed and signed Application Form for loan approval:

PURPOSE DOCUMENTS

 Valid Passport
Proof of both
identity  Voter ID Card
and residence  Aadhaar Card
(any 1)
 Valid Driving License

 Last 3 months’ Salary Slips

Proof of income  Last 6 months’ Bank Statements, showing salary credits
 Latest Form-16 and IT returns

Other  Employment Contract / Appointment Letter in case current

25
 employment is less than 1 year old
 Last 6 months’ Bank Statements showing repayment of any
ongoing loans
documents
 Passport size photograph of all the applicants / co-applicants to be
affixed on the Application Form and signed across
 Cheque for processing fee favouring ‘HDFC Ltd.’

Property related  Copy of the Allotment Letter / Buyer Agreement

documents  Receipt/(s) of payment/(s) made to the developer

INTEREST RATES

For Salaried:
RETAIL PRIME LENDING RATE: 16.45%

Loan slab % p.a

For women (upto 30 lakhs) 8.50- 9.00
For others (upto 30 lakhs) 8.55- 9.05
For women ( above 30 lakhs ) 8.60- 9.10
For others ( above 30 lakhs) 8.65- 9.15

The said offer is valid only for logins till 31 July, 2018 and first disbursement till 31, August
2018.

Trafficked Loan – 2 Year Fixed Rate Variant:

RETAIL PRIME LENDING RATE: 16.45%

Loan slab %p.a.

Upto 75 lakhs 8.95- 9.45
Above 75 lakhs 9.00- 9.50

CONCEPTUAL FRAMEWORK
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WHAT IS LOAN?

In finance, a loan is the lending of money by one or more individuals, organizations, or other
entities to other individuals, organizations etc. The recipient (i.e., the borrower) incurs a
debt and is usually liable to pay interest on that debt until it is repaid as well as to repay the
principal amount borrowed. The document evidencing the debt (e.g., a promissory note)
will normally specify, among other things, the principal amount of money borrowed, the
interest rate the lender is charging, and the date of repayment. A loan entails the
reallocation of the subject asset(s) for a period of time, between the lender and the
borrower.

The interest provides an incentive for the lender to engage in the loan. In a legal loan, each
of these obligations and restrictions is enforced by contract, which can also place the
borrower under additional restrictions known as loan covenants. Although this article
focuses on monetary loans, in practice, any material object might be lent.

Acting as a provider of loans is one of the main activities of financial institutions such as
banks and credit card companies. For other institutions, issuing of debt contracts such as
bonds is a typical source of funding.

TYPES OF LOAN

Lenders offer home loans, not only for buying a house but also for a variety of other
purposes. Some of the popular types of home loans available in the financial market are
described below.

 Loans for Purchase of Land

Several banks offer loans for land purchase. Purchasing a land is a flexible option, the
buyer can save funds and construct a house whenever his finances allow or just have the
land as an investment. Up to 85% of the cost of the land is given as loan by lenders like ICICI
Bank and Axis Bank.

27
  Loans for Home Purchase

The most popular type of home loan is the loan for purchase of a new or a pre-owned
home. This loan is also commonly available and is offered by many banks in different
variants. The interest rate is either floating or fixed and generally ranges anywhere between
9.85% and 11.25%. Also, 85% of the total amount is offered as a loan by many banks.

 Loans for Construction of a House

This loan is specially designed for people who want to construct a place according to their
wishes rather than buying a pre-constructed house. The approval process for this type of
loan is different for it takes into account the cost of plot also. The most important clause
when applying for a home construction loan is that the plot must have been purchased
within a year for the plot cost also to be included in the loan amount. The loan amount is
decided based on a rough estimate of the construction cost. The amount may be disbursed
at one go or in multiple installments. Popular home construction loans include the schemes
offered by Bank of Baroda, UCO Bank and Canara Bank.

 House Expansion or Extension Loans

Want another balcony or an additional bedroom? No worries, some banks also offer loans
for house expansion including alteration of current structure and construction of new
rooms. HDFC Home Extension loan and house renovation loan offered by Bank of Baroda
are popular in this category.

 Home Conversion Loans

People who have already availed a home loan and have purchased a house with it but
want to move to a new house can opt for home conversion loans. By transferring the
current loan to new house, borrowers can fund the purchase of the new home and also
need not repay the previous home loan. Though it offers convenience, this segment of
home loan is also very expensive.

28
  Loans for Home Improvement

Renovation and repair works like external and internal repair, painting, construction of
overhead water tank and electrical renovation certainly will make your house look better.
But if you lack the finances for repair and renovation, banks like Union Bank of India, ICICI
Bank and Vijaya Bank offer specialized home improvement loans.

 Balance Transfer Home Loans

This option can be availed when an individual wants to transfer his home loan from one
bank to another bank owing to reasons like lower interest rates or better services offered by
the other bank. This is done to repay the remaining loan at a revised, lower interest rates
offered by the other lender.

 NRI Home Loans

Specially designed to support non-resident Indians in buying a residential property in

India, the formalities and application procedure for this type of loan is different from the
others. Generally, most of the private and public sector banks offer NRI loans as a product of
their housing loan portfolio.

 Bridged Loans

Bridged Loans are short term loans that are designed for existing homeowners who are
planning to purchase a new property. It aids borrowers to fund the purchase of new house
until a buyer is identified for the existing property. This type of loan usually requires the
mortgage of new house with the bank and is extended for less than two years. Several
banks like Vijaya bank and HDFC Bank offer bridged loans.

 Stamp Duty Loans

29
 Not a widely known segment of home loans, stamp duty loans are offered to cover the
stamp duty charges during the purchase of a property.

With home loans becoming the norm of the day when it comes to purchasing a home, it
also becomes equally important to identify your requirement and apply for the right type of
home loan. Not only will it reduce the paperwork and simplify the loan approval process, it
will also allow you to enjoy a loan at reduced interest rates. Also, make sure you use an
home loan EMI calculator to know your amortization schedule and plan the finances better.

REAL ESTATE

The real estate sector is one of the most globally recognized sectors. In India, real estate is
the second largest employer after agriculture and is slated to grow at 30 per cent over the
next decade. The real estate sector comprises four sub sectors - housing, retail, hospitality,
and commercial. The growth of this sector is well complemented by the growth of the
corporate environment and the demand for office space as well as urban and semi-urban
accommodations. The construction industry ranks third among the 14 major sectors in
terms of direct, indirect and induced effects in all sectors of the economy.
It is also expected that this sector will incur more non-resident Indian (NRI) investments in
both the short term and the long term. Bengaluru is expected to be the most favoured
property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa,
Delhi and Dehradun.
India's rank in the Global House Price Index has jumped 13* spots to reach the ninth
position among 55 international markets, on the back of increasing prices in mainstream
residential sector.
The Indian real estate market size is expected to touch $180 billion by 2020. The housing
sector alone contributes to 5-6% of the country’s GDP. Retail, hospitality and commercial
real estate are also growing significantly, providing the much-needed infrastructure for
India’s growing needs.

30
With property boom spreading in all directions, real estate in India is touching new heights.
However, the growth also depends on the policies adopted by the government to facilitate
investments mainly in the economic and industrial sector. The new stand adopted by Indian
government regarding foreign direct investment (FDI) policies has encouraged an increasing
number of countries to invest in Indian Properties.

India has displaced US as the second-most favored destination for FDI in the world. As the
investment scenario in India changes, India which has attracted more than three times
foreign investment .

Segments in the Indian Real Estate

Real estate can divided into four categories:

Residential
Commercial
Hospitality
Retail

We can invest into all the given areas and can make return by capital appreciation, rental
income, agricultural produce, lease and commercial use.

Residential Space

31
Residential growth in the real estate sector has been huge. There have been a number of
reasons for the same. Indian population has been growing at a tremendous rate. The
demand for houses has increased considerably and so have prices because of the demand
supply gap.

Even with quite a boost in the sector, there is still a gap in demand and supply. The housing
shortage in urban India stood at 20.5 million in 2010 and that in rural India was 26
million. The current residential space scenario depicts huge opportunities. There are many
small players and only a few large ones.
With growth in population, the demand for real estate is expected to increase. Urbanization,
increasing income, easy availability of finance and growth of nuclear families are other
factors that will drive demand for residential real estate, further.

Commercial Space

The office space in India has also shown a growing trend in the last few years. The growth
has been usually due to the services sector and IT sector. IT companies have huge
requirement for space because of the large employee size and their ever growing business
needs. Tax benefits have also led to the growth and development of IT parks and SEZs.
During the recession period, the commercial space demand decreased drastically which led
to excessive supply of office space. This demand supply gap has led to many vacant office
spaces. This also led to a fall in the rentals by almost 25-30%. Although the economy has
picked up slightly, the rental rates have not fallen further but neither has it led to the
appreciation of the rents. Because of the lesser amount of office spaces are being rented
out; the operating trend for the trend is moving from buying the property to leasing out the
space.

Retail Space

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The retail industry had been growing at a very fast pace before the 2008 recession, post
which the growth is not that high. The key drivers for the growth of this sector have been
mainly lavish lifestyles, high disposable income and tendency to spend. Because of this
growth in the industry, the real estate industry recorded an increased demand. This demand
has been mainly in the Tier II and Tier III cities where the penetration of the retail industry
has growth dramatically.
A numerous malls have come up in the various cities. The footfalls in the malls had
increased immensely till 2008 post which foot falls have reduced due to which profits have
reduced. This sudden change forced developers to delay newer projects. Many new project
launches are postponed due to the weak market.
Going forward it is expected that with the revival of the economy the growth in this sector
would boom again. Also, with various MNC retailers entering the Indian market along with
the increased FDI limit for multi-brand retail, it is forecasted that the demand will rise
significantly.

Hospitality Space

Increased domestic, business and leisure travel has led to the increase in hospitality real
estate demand. The hospitality market comprises of not only hotels but service apartments
and convention centres too. And, service apartments are particularly attractive in this
industry. Rising incomes, packaged tours, easily available travel guides and lavish lifestyles
are the key drivers that have promoted this segment of the industry.
Prior to 2008, ARR (Average room rate) and OR (Occupancy Rate) were higher post which
hotel industry faced a fall in demand which negatively impacted the industry revenues.

Literature Review

33
1. Anitha ,A. Abbas (2019) in his study made an attempt to measure the customer
satisfaction in regard of RERA and finds that there are few key performance indicators for
Buyers that are critical to them, these are;

• Approving applications and providing customers with an access to their fund quickly.

• Setting and meeting expectations during the application approval process

• Avoiding surprising the customer during the origination process

• To protect them from exploitation.

2.Hoyer and Brown (2019) With RERA coming into effect, builders and developers are more
transparent with the home buyers which have boosted the housing loan industry. As the
result of such the housing loan industry is being increased by threefold and the future of
housing loan industry is more bright.

3. J.Singh & Sharma (2019) The emergence of Real Estate Investment Trust in the Indian
market has also opened up a new window of investment for the investors to participate the
real estate growth story and RERA help in achieving so.

4.Karthik (2019) in his study about the Housing loan find that due to more of illiteracy in
India people has less faith in the act passes by government as a result of it home loan buyers
has less faith in RERA and more in local sellers.

5.Deepa Devi (2018) It sets out the definitions of affordable housing in India and the issues
with the various definitions of affordable housing, the institutions and agencies responsible
for formulating and implementing affordable housing policies in the state and found that
RERA hasn't any significant result due to lack of awareness on the part of buyer.

6. Meghwant Singh Thakur (2018) The Real Estate Regulatory Authority (RERA) brings
transparency, accountability and efficiency into the housing sector with the rights and duties
of both buyers and developers being clearly defined. Which helps in bringing a better and
clear picture for both buyers as well as developers.

34
7. Pavan N. Ghumare, K.A. Chauhan, S. M. Yadav (2018) finds that to safeguard
homebuyers and investors in the real state segment, the parliament of India passed
the principles and procedures of RERA in March 2016 and with the implementation of it
the relation between buyer and seller is also enhancing.

8. P. Hanumantha Rao (2018) The changes made by RERA are very significant from the
perspectives of housing market in India. Activities in housing market depend on the
efficiency of housing finance industry which is also boosted by RERA act.

9.Paul Jack (2018) in his study he made an attempt to analyze the overall customer
satisfaction. The study pointed out that for consumers shopping for a home loan things like
closing cost and price including interest rates and fees are particularly important
considerations than just going blindly for RERA act.

10. Swapnil Shashikant Shinde (2018) RERA act brings centricity for the real estate and
transparency between the buyer and seller which is boosting the housing loan industry. but
irrespective of all positive aspects there are some loopholes which soon has to be fill in
order to make it a complete package for both buyers as well as sellers.

11. Hussain and Zafar (2017) Customer is more interesting in taking home loans where the
state has implemented RERA irrespective where the act is not in use. As result gather from
secondary resource shows that buyers are 68% more intrigued to buy home where RERA is
implemented in comparison of other places where RERA is not in action.

12.Ram Sharma (2017) The research covers the initiatives of Government undertaken to
boost affordable housing in India. The credit linked subsidy scheme was found to be
effective in improving the housing affordability of the economically weaker sections as
comparison to RERA as buyer actually doesn't know the benefit of the act and moreover
every state is not following it too therefore restrain themselves to come into the boundaries
of RERA.

35
13.S. Bahadorani (2017) have conducted a study to understand the major factors affecting
the housing finance decisions of customers and have found out that reputation, interest
charged on loans,price,ease of buying are of less importance rather than Criteria like
whether RERA is being in used is given more importance.

14. Shalini Rohilla Panigrahi (2017) The main aim of RERA is to provide relief to the buyers
from the malpractices of unfair builders. In case of any wrongdoing by the
builder/developer, the home buyer can also file a complaint to this authority and timely &
duely actions are taken by the authorities.

15. Soni and Singh (2017) finds that there is direct and deep impact of RERA on home loans
buyer needs and psychology. As per study conducted it was found that almost 72% of
buyers seek whether the norms of RERA are being followed or not.

16. Sumant Kulkarni (2017) The enactment of RERA Act 2016 , it able to make a step
forward for the sophisticated and transparency in the Real estate market for both seller and
buyer. But implementation of RERA hasn't derived tremendous result as well.

17.Arun Kumar (2016) It covers need of development of large–scale affordable housing that
is greatest necessity of urban India today. The objective of creating affordable housing is to
provide adequate Affordable Housing shelter to all. To make affordable housing work in
India, it would require that RERA should be implemented in a diligence manner.

18.S. M. Yadav (2016) Housing affordability is a multidimensional problem and is present

from a very long time but RERA could act like a game changer and could turn the table
which will favor the Housing loan industry.

19. S.R. Chauhan (2016) A sustainable and accessible model for the affordable housing can
be achieved in developing nations like India through proper implementation of government
schemes like RERA which has completely revolutionized the way housing industry work and
converted into more easy and convenient industry to deal into for both buyer as well as
seller.

36
20. Venkatesh (2016) This study shows that the forte of RERA is very large which is
beneficial on one side for the parties concerned but along with it also brings great sort of
confusion therefore to make it more convenient the RERA act should be amended with
some sort of easiness

RESEARCH METHODLOGY

Objectives

 Critical analysis of RERA

 Impact of RERA

1. Impact on consumer

2. Impact on builders

3. Impact on real estate industry

NEED OF THE STUDY:

 To explore the forte of RERA

 As study material on RERA is not sufficient therefore to do critical analysis on it

Data collection : Secondary data is being taken from various sources.

LIMITATIONS OF THE STUDY

37
  Secondary data is being taken

 Reach is limited due to secondary data

 Lack of reliability

 The topic is very subjective

 As the topic is new therefore deep and detailed study is not available

RESULTS & DISCUSSIONS

Critical Analysis

The Real Estate (Regulation and Development) Act, 2016 came into force on May 1, 2016
with 69 out of 90 sections notified by Ministry of Housing and Urban Poverty Alleviation.
The basic intention to bring this law was to bring transparency amongst the real estate
transactions so that the interests of the consumers can be protected and malpractices done
by the developers can be minimized or eliminated. A Control Mechanism was surely needed
in the Real Estate Sector contributing a good % in India’s GDP. The accountability and
responsibility measures that were taken to come up with RERA were the demand of this
industry. Although it has been 3 years after the enforcement of RERA Act but the proper
implementation geared from May 1, 2017 in most of the states of the country.

Benefits

1. Completion/ Delivery of Projects:

38
According to ICRA’s research, there has been a marked improvement in project completions (ICRA’s
sample set: 11 listed real estate developers who have projects across India)

Project completions increased from 30.02 million sq-ft in FY2015 to 45.51 million sq-ft in FY2017

Project deliveries witnessed a growth of 30.5% from 2016 to 2017

2. Model builder-buyer agreement, disclosure norms has brought transparency in the real estate
sector

3. The Act has been effective in boosting confidence in the buyers. This is reflected by the increase in
housing sales. Home sales registered a 33 per cent rise in the top nine cities in last one year

4. RERA has been highly successful in Maharashtra.

Currently, more than 25,000 projects have been registered under RERA across India, out of which
62% are in Maharashtra alone

Maharashtra Real Estate Regulatory Authority (MahaRERA) has disposed off 1168 complaints

5. Boost confidence in global investors- increased investment in real estate sector.

Pertaining Issues:

1. Notification of Rules:

Only 20 out of 28 states have notified rules stipulated under RERA

West Bengal, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura are
yet to notify rules

2. Establishment of Real Estate Authority:

Only Maharashtra, Madhya Pradesh and Punjab have permanent regulatory authority

13 states have ‘designated’ regulatory authorities- an existing body designated as authority until
permanent one is established

3. Web portal:

Only 19 states and UTs have a functional portal.

However, there is lot of dissymmetry in data

39
Haryana, Assam, Kerala, Telangana and Orissa do not have web portals.

4. Establishment of a Real Estate Appellate Tribunal:

Only 15 out of the 35 (states and UTs) have appellate tribunal

5. Potential conflict between IBC and RERA:

Fundamental contradiction-

IBC allows companies to file for bankruptcy to provide relief to debtors or creditors

While, RERA seeks to provide relief to homebuyers and hold developers/ builders for project delays

RERA does not address the issue of insolvency of a developer

Note:

Recently, the Union Cabinet has cleared an ordinance amending the Insolvency and Bankruptcy Code
(IBC)

The amendment is expected to facilitate homebuyers when it comes to recovering their dues from
bankrupt companies.

6. Conflict between state and Centre over RERA implementation

State governments regulated real estate before RERA as land and land improvement are in the State
List of Seventh Schedule of the Constitution. RERA has been enacted under Concurrent List. This has
increased the tussle between various states and Centre over implementation of RERA

7. Dilution of Act by States:

Act has been diluted by States to favour developers.

Major areas of dilution include: Definition of ongoing projects, penalties for non-compliance with the
Act and payment schedule and liability in case of structural defects

8. Challenge in North East: RERA has been challenged in north-eastern state on certain constitutional
grounds- land belonging to the community and autonomous councils

9. Delays due to government approvals:

40
A major concern has been delay due to government approvals of real estate projects (like like
ownership certificate, land use conversion, environmental and pollution NOCs etc)

10. Rudimentary compliance; impractical application:

Example: In Uttar Pradesh, a large number of new projects are concentrated in Ghaziabad, Gautam
Budh Nagar, and Noida. However, the interim regulator is located in Lucknow. This has caused
inconvenience to consumers as they need to travel to Lucknow to file their complaints.

Way Forward:

1. Centre and state must collectively resolve any conflict arising out of RERA implementation

2. Potential conflict between RERA and IBC to be checked

3. Government agencies should be made accountable for the delay in granting approvals

4. States should not dilute the RERA provisions. Provisions for punishment of violations, should be
kept intact in all state laws

5. A robust IT infrastructure should be established for monitoring projects and quick redressal of
grievances

6. The government has already set up Central Advisory Council (CAC) for effective implementation of
RERA. The scope of functions of CAC should be broadened to include advisory to state bodies on
issues related to RERA compliance

7. Ensure flow of funds in the sector; endowment funds should be made available to developers.

8. States should fully implement RERA to curb black money, given large part of it originate and flows
in the real estate sector
9. For effective implementation, the centre has already intervened and notified June 30, 2018 as the
last date for the states to remove dilution of the Act and include all completed projects under RERA.

41
Impact of RERA

RERA impact on home buyers -

Some of the important compliances are:

 Informing allottees about any minor addition or alteration

 Consent of 2/3rd allottees about any other addition or alteration

 No launch or advertisement before registration with RERA

 Consent of 2/3rd allottees for transferring majority rights to 3rd party

 Sharing information project plan, layout, government approvals, land title status,
sub-contractors

 Increased assertion on the timely completion of projects and delivery to the

consumer

 An increase in the quality of construction due to a defect liability period of five years

 Formation of RWA within specified time or 3 months after majority of units have
been sold

The most positive aspect of this Act is that it provides a unified legal regime for the purchase
of flats; apartments, etc., and seeks to standardize the practice across the country. Below
are certain key highlights of the Act: Establishment of the regulatory authority: The absence
of a proper regulator (like the Securities Exchange Board of India for the capital markets) in
the real estate sector, was long felt. The Act establishes Real Estate Regulatory Authority in
each state and union territory. Its functions include protection of the interests of the
stakeholders, accumulating data at a designated repository and creating a robust grievance
redressal system.

To prevent time lags, the authority has been mandated to dispose applications within a
maximum period of 60 days; and the same may be extended only if a reason is recorded for
the delay. Further, the Real Estate Appellate Authority (REAT) shall be the appropriate

42
forum for appeals. Compulsory registration: According to the central act, every real estate
project (where the total area to be developed exceeds 500 sq mtrs or more than 8
apartments is proposed to be developed in any phase), must be registered with its
respective state’s RERA. Existing projects where the completion certificate (CC) or
occupancy certificate (OC) has not been issued, are also required to comply with the
registration requirements under the Act.

While applying for registration, promoters are required to provide detailed information on
the project e.g. land status, details of the promoter, approvals, schedule of completion, etc.
Only when registration is completed and other approvals (construction related) are in place,
can the project be marketed. Reserve account: One of the primary reasons for delay of
projects was that funds collected from one project, would invariably be diverted to fund
new, different projects. To prevent such a diversion, promoters are now required to park
70% of all project receivables into a separate reserve account.

The proceeds of such account can only be used towards land and construction expenses and
will be required to be certified by a professional. Continual disclosures by promoters: After
the implementation of the Act, home buyers will be able to monitor the progress of the
project on the RERA website since promoters will be required to make periodic submissions
to the regulator regarding the progress of the project.

Title representation: Promoters are now required to make a positive warranty on his right
title and interest on the land, which can be used later against him by the home buyer,
should any title defect be discovered. Additionally, they are required to obtain insurance
against the title and construction of the projects, proceeds of which shall go to the allottee
upon execution of the agreement of sale. Standardisation of sale agreement: The Act
prescribes a standard model sale agreement to be entered into between promoters and
homebuyers.

Typically, promoters insert punitive clauses against home buyers which penalised them for
any default while similar defaults by the promoter attracted negligible or no penalty. Such
penal clauses could well be a thing of the past and home buyers can look forward to more
balanced agreements in the future. Penalty: To ensure that violation of the Act is not taken
lightly, stiff monetary penalty (up to 10% of the project cost) and imprisonment has been
prescribed against violators.

Impact of RERA on real estate industry

 Initial backlog

43
  Increased project cost

 Tight liquidity

 Rise in cost of capital

 Consolidation

 Increase in project launch time

Initially, a lot of work is to be done to get the existing and new project registered. Details
such as status of each project executed in last 5 years, promoter details, detailed execution
plans, etc., needs to be prepared. With the advent of RERA, specialised forums such as the
State Real Estate Regulatory Authority and the Real Estate Appellate Tribunal, will be
established for the resolution of disputes pertaining to home buying and the aggrieved party
will have no recourse to other consumer forums and civil courts, on such matters. While the
RERA sets the groundwork for fast-tracking dispute resolution, the litmus test for its success,
will depend on the timely setting up of these new dispute resolution bodies and how these
disputes are resolved expeditiously with a degree of finality.

 
RERA impact on builders

1) Full and complete disclosure on the website:

RERA has made it mandatory for every property builder to post information of projects on
their websites. Builders are also required to clearly specify all the relevant data and
specifications about the property on their website. Information concerning the title of the
deed, co-owners, details about common area space like the parking lot, gardens, gym area,
club area etc must be clearly specified as well.

2) Approval of a 2/3rd majority of allottees is now needed to make alterations to the

property:

Gone are those days where builders made minor or major alterations to the property layout
without seeking the approval of the respective allottees. RERA has now made it mandatory
for builders to get a formal approval of 2/3rd majority of the property allottees before they
proceed with any minor or major alterations.

44
3) Specifying the exact carpet area is mandatory:

A lot of home buyers had various issues with the fraud or scam made by the builders with
regards to the carpet area. The total area of the house specified by the builder or agents
were quoted after including the area occupied by the balcony, store room, veranda and so
on. This resulted in huge disappointment in the buyers as they ended up having homes
smaller than what they had expected. RERA has fixed this issue and regulations have been
made to ensure that builders specify the exact carpet area of the home.

4) 70% of the funds collected from the property allottees must be deposited in a separate
bank account and will be treated as a reserve account:

Pre RERA, builders had no legal restrictions on the application of the amount collected from
the property allottees. This often led to delay in the project deliveries as builders often
allocated the money collected from property allottees for various other projects. RERA has
now made it mandatory to deposit 70% of the total amount collected from the property
allottees once it is collected. This ensures the right usage of funds and minimises the
chances of delay in project deliveries.

5) Withdrawal of funds must be in proportion to the completion of a project:

The amount withdrawn from the reserve account must now be in proportion to the project
completion as per the law in RERA. Such withdrawals must also be audited by professional
statutory auditors, accountants or chartered accountants. Thus, the builders cannot
withdraw money for purposes other than the completion of the project.

6) Interest levied for delay in the completion of projects:

Delays in the project deliveries had become a common deal in the world of real estate. This
had diminished the hopes of many buyers. But with the RERA, there's going to be a huge
downfall in the trend of delay in project deliveries. The builders are charged extra interest
and penalties for the period of delay.

SWOT OF RERA

45
Strengths of RERA -

 Simplified Procedures

 Transparency

 Timely Possessions

 Trustworthy

 Grievance Redressal

Weakness of RERA -

 Multiple approvals

 Debt blow to developers

 Fewer housing options

 Implementation delay and dilution of norms

 Deterrent to joint ventures

 Insufficient Recovery powers with RERA

Opportunities of RERA -

46
  Take benefit from digital India

 Enter into left out states

 Strategic alliance with IRDA,TRAI,SEBI & RBI

Threats of RERA -

 Website not launched

 Poor IT Infrastructure in some states

 Lack of Real-time updation

 Lack of Single Window Clearance

FINDINGS AND RECOMMENDATIONS IN REGARD RERA

Finding - Delays in the Registration of ‘Ongoing’ Projects with the RERA

Section 4 of the Act lays down that a project must have received a commencement
certificate to qualify for registration with the RERA and to begin to receive funds from
prospective buyers. However, there have been many instances where a promoter has

47
received funds from the buyer without a commencement certificate. This creates a peculiar
situation vis-à-vis registration with the RERA since this certificate is a prerequisite for
registration.

Recommendation-

• The definition of ‘ongoing projects’ as contained in the rules drafted by the different states
must be amended to exclude projects where the structures are fit for occupation, but a
completion certificate has not been obtained

. • In the interim, given that the Act does not allow for any deviations from the basic
requirements for obtaining a completion certificate, all exemption rules notified by the
states that depart from this standard are illegal and hence cannot be enforced.

Finding - Inadequate Time to Complete the Conveyance of a Project under the Act

Section 17 of the Act mandates that the promoter must complete the conveyance of a
project in favour of the allottees within three months of receiving the occupancy certificate.
This period is deemed to be too short by promoters. They claim that while it is presumed
that promoters seek to avoid conveyance in order to retain a stake in the project, the
conveyance-avoiding behaviour of the allottees has not been adequately accounted for by
the Act. Allottees seek to avoid the conveyance of a project so that the promoter continues
to be responsible for carrying out maintenance and repair works for as long as possible. In
the face of such behavior, it may be very difficult for promoters to realistically meet the
three-month deadline set under the Act.

Recommendation-

The promoter must be allowed between six months to one year from receipt of the
completion certificate to complete conveyance to the association of allottees.

Finding - The Drafting of the Law

a. The Act erroneously places ‘structural defects’ and ‘bad workmanship’ in the same basket
when it comes to allowing the buyer to trigger the compensation clause within a five-year
period. Section 14(3) of the Act lays down that the promoter must rectify any structural
defect or any other defect in workmanship, quality or provision of services within 30 days of
the buyer bringing it to their notice. The Act provides the buyer a five-year window within

48
which such defects can be brought up. ‘Structural defects’ refer to defects in the entire
structure, i.e. the building. On the other hand, ‘workmanship’ refers to defects within the
unit, which the allottee must identify within a year of taking possession of the unit. Despite
the difference between the two kinds of deficiencies, the Act, in giving the allottee so much
time to bring them to the notice of the promoter, places a disproportionately heavy burden
on the promoter.

b. Section 18 of the Act allows the allottee to claim applicable interest in the event that the
promoter is unable to complete the project according to the terms of the agreement for
sale. This indicates a lack of emphasis on the completion of the project, which could be
perceived as encouragement by an allottee to claim applicable interest in the event of a
delay. This provision could pose problems in the future, especially during lean periods for
the real estate market, which could cause the market value of a project to depreciate. In
such an event, allottees would be likely avail the option of getting their money back with
interest, as opposed to pushing for the completion of the project.

Recommendations -

• The Act should include a provision for mandatory third-party inspection of the project at
the time of handover of possession

. • While the time period allowed for claims against structural defects should be five years,
this should be applicable from the date of completion of the project and not the date of
handover of possession. On the other hand, the time period for allowing claims against bad
workmanship should be limited to one year from the date of handing over possession to the
allottee.

• The language of the Act must be suitably amended to encourage the completion of the
project.

• The time period allowed to the allottee to claim interest for the period of delay must be
limited to a period of one year from the stated date of completion. The option given to the

49
allottee to walk out of the project after receiving a refund with interest must be allowed
only in certain restricted circumstances.

CONCLUSION

 RERA aims to reduce project delays and mis-selling. In order to do so, authorities
have made it mandatory for all builders/developers to carry out RERA registration
before they start a project.

 RERA has been sub-divided into smaller regulatory bodies, each of which look after
the real estate development in a single state or union territory in India.

 RERA rules are applicable to both residential and commercial properties.

 The standardization brought about by RERA aims to protect the interests of buyers
and developers alike.

 The RERA Act has brought about more accountability and transparency within the
real estate industry.

Therefore RERA has a positive impact on Housing loan industry and also act as a pivot in
increasing the size of the housing loan industry manifold. As Real Estate Regulatory
Authority (RERA) brings transparency, accountability and efficiency into this sector with the
rights and duties of both buyers and developers being clearly defined.

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RERA Act in different states of India

Two years have passed since the RERA Act was passed and currently, more than 22 Indian
states and 6 union territories follow it. Not only has RERA been implemented, but it has also
actively worked towards solving complaints and disputes in each state.

For instance Maha RERA or RERA Maharashtra, has received around 6,631 complaints (as of
April 2019) and has resolved 64% disputes. Following suite are other states like West Bengal,
Manipur and Assam that are gearing up to launch their RERA websites.

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52
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