Goa’s real estate industry is getting closer to supervision. Goa Real Estate Rules 2017 have been framed under the Real Estate (Regulation and Development) Act (RERA) 2016 and they will have to be abided by all builders. The rules are consumer friendly and will be implemented by a regulatory authority. They are expected to come into effect once notified, viz. after the 10 day suggestion period. Here Desh Prabhudesai, president, Confederation of Real Estate Developers Association of India (CREDAI) Goa, gives his opinion on the draft rules and the present industry scenario. He says to Shoma Patnaik that, (draft) rules will not be difficult to comply with excluding clarification on few clauses.
- Realty companies in India as well in Goa are largely welcoming of RERA. Is this a on the surface reaction? Why does the industry feel the need so much for regulation?
Definitely we feel the need since housing industry is large component of revenue generation for the government. It is an important industry in the backdrop of ‘housing for all’ policy of the government. The industry is center point for everybody. It affects all populace. What has happened in the past is that, I don’t mean to say irregularities but there was no control over the industry. So whatever step has been taken by way of RERA is a good step towards organizing this sector. At CREDAI end we welcome the step that the government has taken.
- Lack of control helped realty players to make super profits and grow bigger. You will miss that now.
If industry looks into only the profitability then it will never flourish. Our industry was never flourishing. It was just growing. And any industry growing haphazardly will not benefit the end users and neither the participants. Particularly the housing industry it is a sector by itself. So whenever any new entrant comes to me asking that he has a small piece of land and wants to develop it, I ask them, are you going to take it up as an entrepreneur or because you have land free of cost? Because this industry needs certain things. It needs good architects, engineers, etc. Ultimately the mistake of a doctor is buried underground but mistake of an architect or a builder is above the land and there for everybody to see. Because of the new regulation people who are serous in the business will continue. Only those players who want to conduct themselves professionally will sustain.
- What do you think of the Goa RERA rules that is on public domain since August 22 for feedback?
I think as far as Goa is concerned we are a little late to frame the rules. In fact in 2016 when the Act was passed in the parliament we had approached the government for rules. To implement RERA every state must have its own rules and regulator. But somehow as we were going towards election things got delayed. The government appointed an interim RERA authority recently and finally we have the draft rules.
- What is your opinion of the draft rules?
Unfortunately the problem is that we are on holiday here because of the Ganesh festival . I personally have not got much time to go into the particulars but our expert committee will go through the draft and before 10 days come up with suggestions. Prima facie what I feel is that Goa rules are based on the Maharashtra rules to some extent and secondly they are based on the Act. So the local RERA authority has obviously studied the Act and framed whatever is suitable to the local conditions.
- Local builders are going to be okay with providing authentic land titles, depositing funds into separate account, sticking by the original design, giving the cost break-up of the project, etc.?
I have to tell you that in Goa among 90-95 per cent of the builders the pre-booking concept is very less. Majority builders display our permissions to buyers. Practically we have the foundation laid and then we announce the project. Secondly in Goa we have a system wherein our advocates study land titles that go back 50 years. Builders here do business with property having clear tittles. We do not have to fear the regulatory authority. We have to just submit the disclosures, explanations asked for. The regulator is expected to watch and oversee. The Goan housing industry goes back more than 40-50 years. The industry is grown largely on the back of private builders. As far as CREDAI is concerned our members have to sign a moral code of conduct. We have certain rules and many of the RERA guidelines are incorporated in our rules. The RERA rules are simple. It basically says, have all permissions before announcing the project to buyers.
- You foresee no difficulty in compliance with the rules?
Everywhere in India and not alone Goa there should be no difficulty in compliance. It is an online registration system. The government wants to ensure that builders fulfill the promises made with the home buyer. For builders the major problem could be in timely completion. The government does not want that we delay delivery or divert funds between projects.
- According to consumer groups, the proposed rules does not safeguard against runaway profits by builders?
Ultimately the government can only monitor but it cannot have 100 per cent control over the business. The builder profitability is fixed on land cost, construction cost and the profit. Now even where GST is concerned there is an anti-profiteering clause. But it all depends on the project. We try to balance out things. If land cost is out of our control, the selling rate cannot be controlled.
- The rules also do not touch upon how builders receive payment from buyers?
Authority cannot be looking into that aspect. But let me be very frank, the cash component system is abolished in Goa long back. Buying a flat by paying cash no longer exists for five-ten years now because people are taking housing loans. They have to pay certain sum upfront. There is no need of putting such things in the rules because ultimately it is a business.
- Builders have to refund the money back with interest if the buyer wants to opt out. What is your opinion on it?
Goa RERA rules are extremely consumer friendly. If refunds have to be done with interest as per law we will do it. But we are going to suggest to the government accountability from their end. What happens if we do not get the completion certificate from the government on time because of some small lacuna on our part? Do consumers pay on time? We never go harsh and charge interest whenever a consumer cannot pay installments on time. The local government has to give us permissions on time for projects to be completed on schedule.
- What is the current scenario in Goa’s real estate market?
Every ten years the cycle changes. The first recession we faced was in 1995-96. It did not last long and the cycle started again. But this time the recession is continuing and lasting longer because of two-three reasons. Thanks to demonetization, RERA, GST, people have questions in their mind. People believe that it will bring down land prices. But what has demonetization to do with real estate prices? Will demonetisation bring down land prices for builders? People are waiting for property prices to fall and people wait and that is how the recession is continuing. The market is slow but in another six months things should move. The scenario is just picking up. Real estate prices have corrected and they are realistic now. Home prices will not come down from these levels.
- What about the GST impact on housing sector?
Right now we are charging the consumer 12 per cent GST but the government has announced GST on all inputs. We are not in position to assess goe GST will impact our business because as of now we done just one filing of returns. A full cycle of returns and input credit needs to be completed to properly assess the GST impact.