'Industry status must for realty sector'
Recently elevated as National President of Confederation of Real Estate Developers Associations of India (CREDAI) from Vice President, C Shekar Reddy,...
Excerpts of the interview :A
A On the proposed regulatory bill
Of course, regulator for real estate is a welcoming step. But we disagree with the idea of extending discretionary powers to the regulator, e.g Revocation clause - according to the clause, the regulator can revoke the licence if the developer fails or delays the project. But, this act will jeopardize the entire system and play havoc on various stakeholders like bankers and even the end buyer would suffer a loss.
In fact, we have suggested penalising the developer for his lapses, instead of keeping him off from the project. If this clause is allowed, it would be difficult for the small and even medium developers to continue in the business. It would leave only few builders in the ring causing a monopolist market. At one point, it may even lead to cartels, similar to the cement industry.
On funding the projects This is another issue we need amendments in the bill. The builders are not allowed to collect from the buyers, and if collected 75 per cent of the amount must be kept separately deposited in an escrow account. This proposal would never be successful, unless real estate business is regarded as an industry and funds from the banks can be availed freely similar to industry. As of now, the banks are funding the real estate projects considering high risk-weightages.
Delay of project This issue needs broad and elaborate discussions. And I like to put another question. Why to penalize only the builder? This would answer your question. In every real estate project, there are number of stakeholders, while the builder is the nucleus and the end buyer is the beneficiary. From obtaining the land till the completion, the project runs through various stages and at every stage there is an intervention of local bodies, service providers, financial institutions, fire and security, and in mega projects require airport clearance, environment clearance, etc.
For large projects like a mall or multiplex or group housing, the builder has to earmark about 40 per cent of the project cost towards the expenses and needs a timeframe of about 6 month to 20 months. Sometimes it may take even more time. Then, why the builder is the only person to be penalised for the delay. That is why, we propose a comprehensive regulatory system, which will include all the stakeholders and fix their responsibilities.