Telangana Government Attracts Builders to Construct Affordable Flats in Hyderabad

A government program entrusted with the creation of affordable flats in Hyderabad may finally have begun to gain traction. The government program entrusted with building tens of thousands of two bedroom houses in Hyderabad and the 95 state assemblies within the state of Telangana has been reported to be the flagship program of the Chief Minister of Telangana. It has been reported that tenders for almost 42,000 units have been finalized for the current fiscal period.

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Disappointing Past and A Reason to Cheer 

Work on nearly 21,000 houses has already begun while a little more than 1,600 houses have already been constructed. Although the Project is the flagship project of the Chief Minister of the State of Telangana, the progress of the project had thus far been unsatisfactory. However the housing department now has a new reason to cheer because, unlike earlier, contractors now are coming forward to execute projects.

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While officials employed with the housing department have stated that real estate builders in Hyderabad and others across the state are coming forward due to the relaxation of several norms such as free sand for builders and a reduced Earnest Money Deposit. Investigations have revealed that the relaxation of norms are not the primary reason that builders are coming forward to build houses rather, another likely reason that builders are coming forward is that there have been interventions between MLA’s, MLC’s and builders which has led to the execution of work on the projects by builders.

Unattractive Payout by the State to Builders

In the past builders were reluctant to work on the government project because their financial demands were not being met. The financial demands of builders such as being paid by the government at the rate of 1,500 rupees per square foot, for building in Greater Hyderabad, as opposed to the government’s offer price of 1,250 rupees per square foot led builders away from embracing work on such projects. Furthermore demands by builders to be compensated at the rate of 950 rupees per square foot for buildings in rural areas fell short of the government’s offer to pay only 900 rupees per square foot. Yet due to the intervention of elected officials from Telangana such difference seem to have been brushed aside and builders are now coming forward to build houses for the state.

Other Factors Attracting Builders 

Another possible reason that builders are coming forward to undertake such state buildings projects could simply be that builders have hope that if they work on projects for the government today, they stand to benefit when in the future the state government seeks tenders from builders for other more lucrative realestate projects in Hyderabad and the rest of Telangana.

Real Estate in Bangalore’s KR Puram Lake, Destructive to Water Body

Many who own realestate in Bangalore are pleased to live in their home and enjoy living in a city that has been bestowed the twin titles “city of gardens” and “city of lakes”. Once Bangalore had hundreds of lakes yet according to reputed sources the number of lakes in Bangalore has fallen drastically and today stands at eighty one.

The Death of a Lake

Much has been reported about the state of the Bellander Lake in recent days. It has been reported that the lake’s future as an important water body is in jeopardy because human waste from numerous developments that surround the lake flows into the large water body.  new residential projects in hyderabad

However another lake that is not at too great a distance from Bellandur Lake is also seriously ill and its future is also uncertain. The KR Puram Lake is rapidly degrading due to the lack of a maintenance system that could prevent sewage from being disposed of in the lake. Encroachment on the lake’s borders is also leading gradually to the lakes demise.

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An Important Body of Water

The KR Puram lake is an important body of water for the locals who depend on a daily supply of water from the lake for essential activities. However today any visitor to the KR Puram lake could see for themselves that the quality of the lakes water is putrid and that illegal encroachments are taking possession of the land from which water has receded. Those who want to buy property in Bangalore so as to be near pristine lakes, today may need to do a double think before they go ahead and buy a house in the city.

Efforts By Those Most Impacted

Residents who have been the most impacted by the deteriorating condition of the lake have decided to hold a hunger strike on the twelfth of this month to compel the concerned authority to take action and establish a functioning maintenance system to reclaim the lake. There have been complaints by local residents who state that the dumping of untreated sewage water, non recyclable waste, and chemical effluents is turning the lake’s water into poison.

A resident has filed an RTI which reveals that a sewage treatment plant in the vicinity of the lake that had thus far been believed to treat 21 million liters of sewage a day is only capable of treating a maximum of 20 million liters of sewage a day. Claims by locals which are backed up by strong evidence point to sewage flowing into the KR Puram lake from nearby residential projects in Bangalore,

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Without Bidders, Government Real Estate in India Will House Affordable Homes

If the government’s efforts to auction the land bank of realestate in India that is currently in the hands of the nations loss making state run enterprises fails to attract bidders, the government plans to use the vacant land to construct affordable homes on it.

The Story Thus Far

A state run real estate firm intends to soon auction 2.000 acres of land that belongs to five loss making state run companies. The companies that will soon have their land holdings under the hammer for auction are Instrumentation Limited, HMT Bearing Limited, Tungabhadra Steel Products, Hindustan Steel Products, and HMT Watches Ltd. If the land holdings of these companies refuse to attract government bidders when the land in auctioned, the government will consider constructing affordable homes on the land.

Public Sector Companies Given Preference

It was reported to this property site in India by a senior government official that in case public sector companies as well as the various state governments fail to bid for the land parcels when they are auctioned, the government will conduct a feasibility study considering the possibility of building affordable houses on the land. If the feasibility study proves that the land would not be a suitable backdrop for affordable property, the government will open the land to private bidders.

As reported by the senior government official, the governments goal is not to generate as much revenue for itself as possible by auctioning the land but rather to utilize the land to it’s fullest potential.

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A Possible Role for State Governments

The state run real estate firm charged with the responsibility for all 2,000 acres of land will hold talks with the respective governments to ascertain whether they would be willing to buy the land. If the governments do not agree to buy the land, a feasibility study will be conducted. If the study indicates that affordable real estate can be built on the land, the state run real estate firm will comply and construct affordable houses on the land. Additionally, if the governments agree buy the land banks, the state run real estate company will provide the various governments who bought the land with the required expertise to build houses on the land.

More Land Banks Up For Sale 

In the next few months there may be more land banks up for sale according to the Chairman of the company responsible for auctioning the land banks of the five PSU’s mentioned. The land banks of six more government run companies may be up for sale within the next few months in addition to the current land banks of the 5 loss making state run companies that are up for sale.

Land Bank Sale Management Galore

The state run real estate company which will auction the land bank of the five companies mentioned has also been appointed as the Land management agency responsible for auctioning the real estate assets of the other six loss making government firms.

After the land bank auction of loss making firms has been successfully completed, the state run real estate company that conducted the sale shall receive half of one percent of the value realized from the auction as its fee for services rendered. The maximum the company may receive from the auction has however been capped at 1 crore.

In Conclusion

The central government will be the first suitor considered for the land banks, followed by Central PSE’s, State Department’s, and finally state government bodies will be considered suitors for the land banks. If all these government’s and government companies do not agree to purchase the land banks within six months, then, according to this real estate website the government will auction the land to private players.

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Under RERA, Little Respite for Buyers with Investments in Unfinished Property in India

Home buyers who had hoped that work on their delayed best property in India would be fast tracked thanks to the RERA may have reasons to be concerned. Experts feel that buyers who had purchased houses in projects on which work has stalled or stopped because of legal issues may not experience any benign impact due to the Real Estate Regulatory Act. Furthermore there may also be no relief to homebuyers who had been hoped to receive their home speedily post RERA led enforcement in cases where the builder responsible for the project had used up all the money designated for the project.

RERA’s Is Geared Towards the Future

The goal of the RERA may in fact be to make home buying in the future a more transparent and speedier process, it’s power to serve buyers who had invested in undelivered projects in the past is less visible. Due to disclosures about projects by promoters after RERA has come into force, buyers will be able to make more informed decisions.

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Promoters Have Option to Extend Completion Date

Under the RERA, promoters have the option to extend the date of ongoing projects while promoters register such projects. While the law requires that all ongoing projects must be registered with the state regulator before July 31, the law still empowers the builder to extend the deadline of the ongoing project while he registers the project with the state regulator.

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The newly established Maharashtra State Regulators website has stated that while a promoter registers a project, the revised date of the projects completion must be provided. This revised date must correspond with the work that has thus far been completed on the project. Hence, realistically a project that is only week away from completion cannot ask for a revised completion date of several months or a year.

Experts have commented on real estate sites that by providing an extension date to promoters when they register their projects, promoters are in effect being granted a fresh extension on projects that are delayed or projects that are about to be delayed.

The Problem for Home Buyers

If a builders inaction has led to delays on a yet to be completed project; home buyers who seek action against such a builder using the RERA will discover that the RERA has no clause to help them deal with such a scenario. Additionally if builders have been unable to complete projects despite receiving funds from buyers for partially or fully completed units, under the RERA, builders are eligible to seek an extension on the project while they register the project.

In case buyers had hoped for a swift resolution to projects that had been delayed due to legal issues, they will be disappointed as the builders, under the RERA will have to disclose the status and delays on past projects in accordance with the RERA.

Conclusion

Home buyers who have thus far been suffering under the burden of EMI’s paid for delayed projects may not find an immediate respite due to the RERA. According to this property website, home buyers who have yet to receive ownership of fully or partially paid for homes may have no recourse but to approach the District, State, or National Consumer Forum to vent their grievances.

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Under RERA Builders and Buyers to be Penalized Equally Concerning Property in India

Those who have invested in a best property in India the delivery of which has been delayed will receive a return on the amount invested. The return the buyers will receive due to delay on the part of builders will be at the rate prescribed by the RERA. RERA has prescribed this rate to be 10 percent as opposed to the flat payments of 5 rupees per square foot to 10 rupees per square foot that are contracted on the sales agreement.

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Developers May Continue to Advertise Unregistered Projects 

Till date developers have not been barred from advertising and marketing their projects and may continue to do so according to regulators of Madhya Pradesh, Punjab, Haryana, and Delhi. Many doubts held by builders were dispelled as they were clearly informed that they may register their project by the last day of July this year. The interim regulatory authority under the RERA stated at a conference organized by FICCI to builders that they need not register their project first before advertising the projects. Projects by builders can continue to be advertised without first being registered as they had been during the pre RERA regime.

Projects for which the application for registration has not been made by July 31 of this year with the regulatory authority cannot be marketed by builders. The joint secretary of the housing ministry has stated that fourteen states and union territories have already implemented the new law and fourteen more states are in the process of notifying the rules and he is hopeful that these fourteen states will notify the rules soon.

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The Late Penalty According to RERA

The Chief Secretary of Madhya Pradesh, Anthony De Sa has stated that the delayed ongoing housing projects will be registered with
RERA only if the builder, in case the project is delayed, has agreed to pay the buyer an interest rate that is the same as the rate prescribed by the RERA authority. The rate prescribed by the authority is 2 percent greater than the SBI’s MCLR (Marginal Cost of Lending Rate) whereas the contractual rates builders had agreed to pay buyers in case of project delays (contractual rates were agreed upon when the sales agreements are signed between buyers and builders) stood between 5 to 10 rupees per square foot. Hence, in the future, properties in India that are built will have attached with them checks and balances to ensure the timely completion of the project.

Understanding the Financials

According to this property site since the SBI’s MCLR stands at 8 percent and in the future builders will be penalized by paying buyers interest at a rate 2 percent greater than the MCLR, hence in case of delay in project delivery, builders will pay interest to buyers at a rate of 10 percent on the amount paid to builders. However both the builders and buyers will have to pay penalties at the same rate of interest I.e. a rate 2 percent greater than the SBI Marginal Cost of Lending Rate. In case builders delay projects they will have to pay buyers at a rate of ten percent of the amount paid by buyers to builders; in case buyers delay payment to builders, they would have to pay a 10 percent penalty on the amount owed to builders.

7 Ways RERA Will Affect Indian Realty Market

Real Estate (Regulation and Development) Act, 2016 or RERA is expected to bring a revolutionary change in Indian realty market. The act was passed in March 2016 and came into effect from May 1, 2017. The government has also formed a body named RERA to deal with the regulation, execution and functioning of the governing law. The government body will focus on smooth and proper channelization of the builders, buyer and real estate agents to make Indian realty market more organized, transparent and reliable.

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Broadly, RERA is said to be a buyer-friendly law, which will compel builders and agents to engage into fair practices. The Minister of Housing and Urban Poverty Alleviation said that the law will make “buyer the king” making transaction of properties in India more consumer friendly.

Giving more power to the buyers is not the only change RERA is expected to bring in the market. Given below are top 7 ways RERA will make real estate market in India better.

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1. Developers need to register new projects which come under RERA norms with the considered authority. Along with this, they also need to register ongoing projects within three months of May 1, 2017. This will largely affect the quality of construction as builders will have fear of the authority keeping an eye on their activities.

2. As per the law, while selling a property builders need to clearly define carpet area, which is the net usable area. This will help buyers get complete value for their money with clarity on transactions.

3. Though the entire nation comes under RERA umbrella, every state needs to establish a State RERA. It will compel states to regulate the market in their region.

4. The rule to register projects on over 500 square meters of land or with eight flats needs to be registered on state RERA website. Buyers now don’t need to check other property websites in India to get project details.

5. Buyers now don’t need to rely only on the Appellate Authority for solution of their problems. They can now also approach consumer courts. Further, buyers now have right to ask the builders for repair of structural defects until five years from the possession.

6. Builders need to deposit 70% of the sale amount in an escrow account for construction of the same project. In case of default, they need to pay interest to the buyers as per prescribed standards.

7. Increased trust and comprehension of the real estate market after implementation of RERA law will draw attention of overseas investors.

Impact of the Real Estate (Regulation and Development) Act can already be seen in the market. There are many real estate websites, which have already started making improvements to abide by the rules.

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A Real Estate Website in India Reveals 2 Consequences of RERA

In the words of a highly esteemed real estate website in India, India’s real estate sector had thus far been actively played as though in one’s backyard following only the most basic rules and with no referee. The Real Estate Regulatory Act will change the nature of the real estate game from one that is played informally in one’s backyard and with rules that are routinely disobeyed, to a game played in a large well constructed stadium between professional players and a referee who enforces rules.

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From May 1 of this year the RERA became the law of the land and hence from the 1 of May onwards each state and UT is to have its own Regulatory Authority that will frame rules and regulations following the provisions of the Real Estate Regulatory Act.

The 2 points below outline how the RERA will, and in some instances already is impacting the market of realestate in India.

How RERA Will Impact House Prices

The price of houses across India has not fallen to the extent it had been predicted it would. A lack of new demand, a large inventory of unsold units, along with demonetization have together not led builders to lower prices significantly. Although builders have not lowered prices, they have offered buyers freebies and discounts to stimulate demand for houses in the primary market.

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Real estate industry veterans have stated that rather than leading to lower prices, RERA will have the opposite effect and lead prices of real estate higher as risks which before RERA were borne by consumers shift towards builders. According to such experts before RERA consumers had to bear the risk of project delays, poor building quality, and unplanned changes in projects. More often than not most consumers had to bear the cost of a default, yet today under the RERA the entire brunt of the cost has been placed on the builders who will pass on the higher costs to consumers in the form of higher prices for new houses. Industry experts have stated that there is no room for builders to absorb these higher risks without raising the price of houses they sell, hence in all likelihood the price of houses sold on the primary market will rise.

The Much Publicized Delays in Delivery

Over the past few months the news has been replete with stories of builders who have delayed in delivering projects to buyers. This may be at an end thanks to the RERA as the Real Estate Act forces builders to create separate accounts for separate projects and to keep 70 percent of the capital paid for a project for use only for the project for which the money was paid. According to this real estate website this will mean that builders cannot transfer funds paid for one project to use on a different project which will lead to a timely completion of projects in the future.