The recent CARE ratings highlight that the implementation of Real Estate (Regulation and Development) Act, 2016 is likely to push modification in realty agreements between various parties including land owners, realty developers and financial investors.
These swift changes will be there to bring all those clause of agreements under RERA purview. Besides, the rating agency hopes that the banks, HCFs and financial organization will have a pivotal role in funding real estate sector accompanied by developers preferring to launch the projects are at advance completion mode in particular not the project under construction.
Facts we come to know from this report of CARE are–
There is a chance of rise in the payback time for the financial institutions for several projects.
The average internal rate of return (IRR) may also witness an increase with the funds received from consumer advances being due towards project completion first and reimbursement being minored.
The cost of the project will go up (includes- hike in funding cost and registration charge), which will be eventually passed on to the consumers.
Suring the last couple of months new project development remained stagnant and is expected to continue like this for at least a quarter. Right now, the fear of being penalized pushing the developers to finish their on-hand projects within the given timeframe. Realty in markets in the states of Uttar Pradesh, Haryana and Gujarat are found safeguarding their on-hand projects from the ambit of RERA, for they have diluted central real estate rule in their notified regimes.
Small-scale developers with higher dependence on advance booking amounts from customers possibly will find it hard to run their business under the new law. The larger developers will be on the ruling position with pecuniary backing received from leading financial organizations.
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