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The real estate sector is full of ‘horror stories’ where homebuyers have either booked or purchased a property in a project that perhaps did not have the required approvals, Ajoy Mehta, a retired IAS officer and former chairman of MahaRERA, has said in his book titled ‘ RERA – A Perspective.’
Mehta, who retired recently as chairman of the regulatory body, said uncertainty surrounding the approval process can lead to an increase in real estate prices. Also, going forward rental housing would be preferred and there is a need to work towards legislation with regulatory interventions to oversee the evolving sector.
“The real estate sector is full of horror stories where homebuyers booked or purchased a flat not knowing that it did not have the relevant approvals at the time of purchase while the promoter was only speculating that he would get approval for the same,” the book reads.
Mehta has said in the book that there’s also this practice of developers selling flats on the higher floors (that command a premium) without clearances from the civil aviation authorities. “It must be understood that while a plot may have the potential to be built up to a certain height this was, however, possible only subject to civil aviation clearances,” Mehta writes in his book.
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Diversion of homebuyers’ money to other projects by developers
Ajoy Mehta has said in his book that another major pain point has to do with the fact that builders would take money from homebuyers for a particular project and the same would be diverted to other projects or other uses. This eventually led to construction of the project slowing down or the project being completely abandoned.
On allotment of parking lots
In the book, Mehta has said that most projects were advertised by stating that ‘ample parking’ is available. The homebuyer is not made aware of the total number of parking spaces available. He is also often kept in the dark about the location of the parking lot.
In most cases, sales were made by just stating that the said unit comes with one parking. There was also resentment when at the time of possession when the homebuyer found that the parking lot was located at “a great distance away from the lift or the point where he exited the building or it was of inadequate size,” Mehta said.
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The future of the real estate sector
Mehta contends that going forward there will be demand for rental housing and that there is a need to work towards a legislation with regulatory interventions to oversee the evolving segment.
“In the future with preference being shown towards rental housing, there will be a need for having legislation coupled with regulatory intervention to oversee this evolving sector. In fact as rental housing develops, a whole ecosystem covering all aspects, including laws, markets, and standard exchange formats would develop for ensuring a robust growth of this market,” Mehta writes.
“Most of the developing countries are seeing a rise in rental housing. Rental housing has always remained an integral part of the urban housing response across the world. However, of late rental housing has begun to dominate the housing market,” he writes.
He notes in the book that in Switzerland almost 56.6% of the population resides in rental homes. In Canada and the US nearly 33.5% and 36.2% respectively live in rental accommodation. As many as 44.8% in South Korea and 49% in Hong Kong. In India, however, the percentage is as low as 11%.
“The trend that appears to be emerging is that as urbanisation increases and cities grow in size, they will witness a larger and larger proportion of their population opting for rental housing,” the former MahaRERA chairman said in his book.
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Uncertainty in approval process have led to an increase in the cost of real estate
Real estate affordability is a major issue of concern. In his book, Mehta talks about the uncertainty that surrounds the approval process and the fact that this leads to an increase in real estate prices.
“In most cases, housing is almost unaffordable or takes away a large portion of the financial resources of the family, leaving very little for essential expenditure. While land forms a major part of the cost, the other factor adding to the cost is the approval process,” Mehta writes in his book.
“There is a great deal of uncertainty in the approval process and a lot of time is lost in getting various approvals. These delays and uncertainty have led to an increase in the cost of real estate. It is now time that predictability is brought into the approval process and the time cycles for the same are reduced. These interventions will go a long way in reducing the cost of housing and ensuring that more investment flows into the sector,” he adds.
