Homebuyers’ Body FPCE Beats the Bushes for President’s and PM’s Mediation for RERA Reiteration by WB Government.

Starting from its inception, till its deviation from the central real estate Act, the Housing & Industrial Regulation Act, 2017 (HIRA) of West Bengal state government, has been creating a big-time buzz in the Kolkata property market. People, willing to buy flats in Kolkata has been set from side to side by the institutional call and its potential impact on Kolkata real estate.

Now, it seems like the state Act didn’t go well with the pan-Indian homebuyers’ representative body FPCE. The Association is up against the redundancy and it seeks central government’s arbitration in this entire event. It’s worth mentioning that FPCE has been representing the homebuyers in all ongoing RERA related cases in Bombay High Court.

As per the latest reports, the forum for People’s Collective Efforts (FPCE), a non-profit company representing homebuyers, that had put all its effort to shift the gear for Real Estate (Regulation & Development) Act, 2016, (RERA) implementation, has asked for the intervention of PM and the President of India in sidestepping the central real estate Act and creating state-level legislation Housing & Industrial Regulation Act, 2017 (HIRA) by the West Bengal state government in particular.

Abhay Upadhyay, president of FPCE and also an active member of the Central Advisory Council, RERA said, “In September 2015, we initiated a movement ‘Fight for RERA’ for the passage of RERA by the parliament. Now we are fighting to save RERA from being made redundant. We hope the central government and lawmakers would understand that seriousness of the issue and take necessary steps to save RERA.”

It’s no secret that Indian real estate market had to undergo a series of reconstructive institutional decisions in the past couple of years and still the shadow of which is very much in the scene in all kinds of parts and parcels in realty transactions. Meanwhile, this is supposed to another cusp from both the structural and investors’ standpoint.

However, in its official letter, the homebuyers’ body clearly requested the President not to give a go to the Bengal government for a separate state-level realty regime. FPCE has made a clear point that no other states than West Bengal have brought forth a separate state-level legislation which will somehow belittle the importance and spirit of the central law.

The constant change in institutional decisions and the volume of opposition they are receiving from different authoritative organizations are up-against the investment sentiment in a big time now which is not a positive sign for the Kolkata real estate market. If the market is going to continue with its existing wait and watch mode; it might also weaken the sales volume in the coming days and also push back the active rollout of RERA in the district,”- said Mr. Mahesh Somani, the Chairman of National RERA Committee and head of eastern zone National Association of Realtors (NAR-India).

Currently, the central government is examining the likelihood and prospect of two individual (state and central) existence on the same subject for the regulation of the real estate sector. After being notified back in 2017, the central real estate Act mandated all the states to notify their respective Acts, before the presence of the state regulatory authority (RA) with the due time and this was the set rule for every other state apart from J&K.

In a previous Central Advisory Council meeting, a sub-committee was formed by the government with the objective of urge the Bengal government to adopt RERA, including the supervision of the implementation of RERA across other states; FPCE now wants this sub-committee to notify their report regarding this matter.

Reportedly, FPCE has suggested revoking the West Bengal HIRA from implementation and asked for one central RERA across the country. Members of the homebuyers’ body also had a meeting with Congress President Rahul Gandhi where they requested Gandhi to raise the concern and to initiate conversation with the Mamata Banerjee Government.

Meanwhile, the state Act has been accused of diluting a couple of the key clauses of the central Act- the definition of force majeure clause and the garage. Where the central Act says that the force majeure clause can be brought into play only in case of war, drought, floods, earthquake, fire or any other natural calamity affecting the regular development of real estate projects; HIRA comes with another version where it says that apart from the mentioned conditions under RERA, force majeure clause can be declared for any other circumstance prescribed.

On the garage part, RERA has defined garage as a place within a project that has a roof and walls on three sides for parking any vehicle, but it does not include unenclosed or uncovered parking area. HIRA, on the other hand, defines a garage as an open space sanctioned by the housing society or the competent authority.

States that have notified the Act and formed the authority have started passing orders. States like Kerala and Telangana have notified their state rules under RERA, but have not set up an authority.

Builders might have to retaliate up to Rs. 20,000 crore in accordance with new accounting rules: (Industry insight)

A life-size wave is all set to bump on the realty builders. As per the wandering industry reports, the implementation of a new accounting standard from this fiscal (starting from 2018) will compel the listed real estate companies to write back profits, that have been consummated from all those projects under completion more than a year now.

This could be another socking line of attack to greet those real estate companies which have been reeling under insolvency code for the past few years or more. However, reports suggest that developers have already submitted their request in written to the government, seeking relief.

Conforming to the global industry standard, IND-AS 115 (new industry standard) mentions that all listed real estate companies will have to write back about Rs. 20,000 crore from their net profit of the current fiscal. The new industry standard started rolling since last April of this fiscal.

Real estate companies will have to run after their project completion with best of their efforts. They will have to switch to Project Completion Method from the existing Percentage Completion Method (POC).

Under the earlier regime, the booking amounts received from the home buyers for under construction projects, used to be shown as yearly turnover and the net income generated from those projects were regarded as gross profit by the builder companies.

Under the revised norm, the amount home buyers would pay towards an on-going project, would be treated as ‘advances’/ ‘loans’; but certainly not as income from sales. The developers have to write back the profit booked till date on all on-going projects that are not fully completed under the new norm.

A recent analytic report published by the ICICI Securities said, “This would happen in the first quarter on a retrospective basis and would lead to a hit on the net worth and lead to a temporary spike in companies’ debt-equity ratio.”

In a submission to the ministry of corporate affairs the National Real Estate Development Council (Naredco) said, “Any change from Percentage of Completion (POC) accounting to accounting on Completion of Project would have a very significant revenues and cost reversal as at the opening balance sheet and re-recognition of the same in ensuing period.”

This new industry standard is expected to impact on the credit rating part. Starting from the revenue generation to the net profit – every calculation will be under the finest institutional radar. This will not only have a direct outlook on the debt-equity ratio of the companies, but also restrict the borrowing capacity of the companies too.

Alike DLF and Lodha Group, many other leading real estate builders have kept their mum on this new industry standard and profit calculation part in amalgam.

“Real estate sector in India has been witnessing one after another massive changes during these past 3 years. Under these significant changes and stringent framework, there is no way a builder can escape from the ethics and the industry standards for his survival and sustenance, in the present market scenario. This change in particular, will definitely have a big bite on the revenue generation of the builders and also will give rise to higher tax outflow,” said Mr. Mahesh Somani, Chairman – National RERA Committee, National Association of Realtors, India.

-By LNN (Liyans News Network)

Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018: Home buyers will be acknowledged as tenable financial creditors.

June 6, 2018- a memorable day indeed from the home-buyers’ perspective. In its recent ordinance to amend the Insolvency and Bankruptcy Code (IBC), the Government of India has declared that henceforth home-buyers in ailing real estate companies would be recognized as financial creditors in the resolution process.

Corporate affairs secretary Injeti Srinivas confirmed that the ordinance would be one prime instrument for every single home-buyer to approach the National Company Law Tribunal to commence insolvency proceedings against a realtor. Based on the signed agreement between the buyer and the seller, if the real estate company goes under water, buyers will have to prove themselves as legitimate creditors in order to claim their rights as lenders.

The rules regarding buyers’ representation is soon to be published. As per the officials, there will be two agreements in some of the states in India; one for the land and the other for the house.

An official statement said: “The Ordinance comes as a significant relief to home buyers by recognizing their status as financial creditors. This would give them due representation in the CoC and make them an integral part of the decision-making process.”

Asking about the impact of this ordinance on the business of reality esp. on the home-buyers, the Chairman – National RERA Committee, National Association of Realtors, India, Mr. Mahesh Somani said, “This is undoubtedly a great move by the government to boost the morality of the home-buyers. Over the years buyers have been hackled by the realty stake holders in terms of deliverance and quality assurance. This one recognition will set them on a par with the banks during the proceedings.”

“Projects like Jaypee, Amrapali and many more that have reeling under the insolvency proceedings, with this secured financial creditor tag, respective home-buyers can now claim their interest during the resolution process and banks will ensure that in no way it would be compromised,” –  added Mr. Somani.

-By LNN (Liyans News Network)

Plagiarism acquisition against WB HIRA: Has Mamata Banerjee Govt. went on cloning central’s blueprint?

So far a lot has been said about the Real Estate (Regulation and Development) Act, 2016 (RERA). But still what remains untold is Bengal Government’s final take on this consumer-friendly Act.

The earlier speculations indicated that West Bengal Govt. might introduce the Housing Industry Regulation Act (HIRA) by the end of 2017. Around so much buildup stories, finally West Bengal Govt. has chosen to boycott the Act and decided to bring in its own set of law after two long years.

RERA came into action primarily to safeguard buyers’ interest and to save the country’s economy from the major harm caused by unregulated and unaccounted cash circulation from the second highest GDP contributing sector- Real Estate. The Act also was made to have a close track on the integrity parameter of the stakeholders.

Additionally, the recent amendment of the Insolvency and Bankruptcy Code (IBC) has further reinforced buyers’ authority and placed them on the same page with institutional leaders, in case the builder seeks for insolvency.

Still, many of the state governments have chosen to stand by the age-old seller- centric infrastructure, where builders used to have the lead role.

The central Act permitted states to tweak the paraphernalia barring the key provisions of the Act. Where most of the states have already established the Act, prioritizing the buyers’ protection fact; Bengal Govt. has chosen to start it from the beginning.

Yet, the state version of RERA is nothing but an inclusion of a few small, symmetrical changes in the central’s Act and it has left the builder’s body satisfied.

A couple of mention-worthy inclusions are:

  • State government holds the authority to declare under what condition/ which circumstances builders fail to deliver the projects on time.
  • West Bengal builders can use an open space inside the housing society for building flats or even they can sell it as parking lots without any institutional go-ahead.

“Government’s decision comes from an in-depth R&D. Undoubtedly, state builders will be benefited under this regime; but it would be interesting to see how the Act watches over the buyers’ interest,”- says Mahesh Somani, Chairman – National RERA Committee, National Association of Realtors, India.

-By LNN (Liyans News Network)

New Year Surprise: SBI Cuts Base Rate by 30 bps to 8.65%

State Bank of India has slashed its Base Rate – an earlier lending benchmark by 30 basis points to 8.65% which means loan borrowers can now lend money from the banks at a cheaper rate. This is a surprising move at the onset of the year and is likely to be carried out by other banks too in the coming days. Yet the bank hasn’t made any changes in its existing benchmark. Thus there will be no change in the marginal cost of the lending rate (MCLR).

From the banking source, it is revealed that over 80 lac borrowers are likely to get benefited from this reduction. On its website, SBI declared, “Base rate reduced from 08.95% p.a. to 8.65% p.a. w.e.f. 01.01.2018.” The bank has also lowered the BPLR (Benchmark Prime Lending Rate) from 13.70 percent to 13.40 percent.

The Base Rate is the minimum lending rate below which banks can’t lend money. The reduction in the Base Rate will definitely benefit the active borrowers, who had borrowed money as home loans from the bank before April 2016 and also people who rose at floating rate. Additionally, the bank has also decided to extend the active waiver on home loan processing fees till March 31 2018, for the new customers who are willing to purchase home and people who want to switch their loan account to SBI.

“This surprise move is likely to usher in more residential property sale throughout the country. A large number of people, willing to buy their dream home in Kolkata and other cities can actually avail easy to repay home loan accessibility. Additionally, the waiver on home loan processing fees will translate in bigger sales and credit growth for the mortgage lending financial institutions, – said Mr. Mahesh Somani, Head- East Zone, National Association of Realtors India (NAR).

However, along with this latest announcement SBI has become the lowest among the other mortgage lenders. Earlier, the bank has reduced its Base Rate by 5 basis points from 9% to 8.95% in September 2016 which had been followed by the other financial institution until this latest announcement. This reduction is an effort of SBI to certify the transmission of reduction in the policy rates in the recent past. However, around 30-40% loans in the industry are still linked to base rates.

According to the latest market predictions, lending rates are an unlikely trend downward unless there is a steady resurgence in credit growth and higher loan volume ad-lib for lower rates.

-LNN (Liyans News Network)- Interested in north Kolkata apartments? Explore luxury residential property in north Kolkata here. Get project details, location map, floor plan, price list and other details explained. Buy/Sell/Rent properties across 100+ cities in India.