New launches of residential projects have almost dried up as builders in Bengaluru await the implementation of the Real Estate Regulation Act (RERA) in the state.
Builders such as Sobha, Prestige, Brigade and Puravankara have all stopped new launches as they want to first look at the provisions of the final regulation before starting new projects. Since the central law orders retrospective inclusion of ongoing projects, builders are wary that hasty launches may land them on the wrong side of the law. “Once the Act is implemented, we will have a clear idea how to process ongoing projects and what is the time frame for registration,“ real estate association Credai Bengaluru's secretary Suresh Hari said.
Sobha managing director J C Sharma said that in view of RERA and GST, the company board had deemed it appropriate to defer providing guidance on the total residential space it wants to launch in the current fiscal. “What we all felt collectively was that till the transition doesn't happen, you do not know how to catch up or whether you can do it better,“ he said in a conference call last month. The Karnataka government was set to notify the RERA from May 1, an Act brought by the Centre last year to protect the interests of home buyers, and bring professionalism and accountability in the sector.
State officials have said the implementation is likely to get delayed as the government has shown no hurry to notify the rules and set up the regulatory body. This, they said, was because of pressure from small builders, especially those involving MLAs from Bengaluru, who are seeking relaxation of certain stringent norms under the Centre's Act. They want time to give possession of apartments to buyers to avoid penalty provisions under the Act for delayed delivery , and want the state government to ensure only those projects that were launched after the Act came into force on May 1 be brought under its ambit.
Sobha plans to launch new projects of about 0.5 million sqft (msf) in Chennai and 0.5 msf in North Bengaluru. “Implementation of RERA would be a key risk to this plan and could delay some launches,“ Edelweiss wrote in a recent note. Brigade Enterprises Limited, which launched just a single project in Bengaluru last fiscal, has a pipeline of 5 msf of residential projects spread over Bengaluru, Mysuru, Mangaluru and Chennai this year.
What has made matters worse for the builders is that neighbouring states such as Telangana and Tamil Nadu, which are also major markets for them, haven't implemented the Act either. The companies cannot even do pre-launch sales because the new law bans it. Prestige chairman Irfan Razack said there are still a lot of uncertainties around the rules. “New launches will happen once RERA is notified,“ he said last week.
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