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Use RERA to your advantage when buying a Mumbai home

The RERA is a veritable boon in the hands of flat buyers in Mumbai. We explain how it helps bring greater transparency in the flat-buying process.

The real estate sector in India has been seeing some curious trends in recent years. On the one hand, there is a constant refrain from buyers that realty is too expensive to invest in at the moment. On the other hand, the luxury housing sector continues to show stable growth! Amidst talks of a slowdown in Indian realty year upon year, came the ambitious RERA (Real Estate Regulation and development Act) that was promulgated all over the country in 2017.

The RERA was created to bring in greater transparency in the house purchase process for buyers. Using RERA helps buyers become privy to all the important information they must necessarily know – flat and real estate developer credentials, project timelines, construction progress, reasons for delay, etc. The RERA is aimed at helping buyers make well-informed decisions about buying Mumbai properties and investing in the right projects.

Are you a first time homebuyer looking to invest in an under-construction property? Here’s a lowdown on how RERA can help you pick the right flat for sale in Mumbai:

* RERA assures you that everything is laid out in black and white. The primary thrust of the RERA is complete transparency, which means that buyers must be privy to all the information they seek whenever they seek it. The Act has been worded to include every facet of the process, from initial construction to final handover of the completed Mumbai property. It also specifies the legal and construction standards that developers must uphold per project, starting with taking a RERA project number that must be clearly mentioned across advertisements, brochures, project plans, etc. This number helps buyers keep online and offline track of the project’s progress. Prior to starting the construction, the developer must give written specifications, include copies of municipal approval, land title and reservation, project timelines, etc. and adhere to the same or furnish written reasons for delays.

* New constructions are more professionally handled from now on. Since RERA specifies stiff legal penalties for inordinate and unexplained delays, developers are now more cautious about using their available funds and giving completion timelines. Smaller players in realty were earlier quite glib about several parameters, which led to delays, stoppages and huge losses for buyers. But the RERA weeds out the unscrupulous developers from the professional ones. Since real estate developers must specify problems and delays in writing, there is no scope for buyers to be left high and dry with stalled projects, or builders abruptly stopping their rent payments (in case of redevelopment projects), etc. Thus, developers are now more accountable for their projects, leading to faster completion.

* Projects are now securing funding much faster. Buyers are now confident about investing in 1 BHK flats in Mumbai, or luxury 2 BHK flats in Mumbai, since every new project must be licensed and approved by RERA. In turn, an approved project automatically increases its own chances of getting home loan funding. This is good news for those buyers who wish to secure home loans for buying flats for sale in Mumbai. Meanwhile, real estate developers are also able to secure funding to start and finish the construction when there is RERA certification for the project.

(Featured image courtesy https://blog.ipleaders.in/stalled-projects-rera/)

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Builders go for broke to sell empty flats

Interest free finance, free electrical appliances on booking the flat, free building amenities…builders are trying every trick to entice buyers.
by The Editors | editor@themetrognome.in

For most Mumbaikars, buying a home is a once-in-a-lifetime task but due to a lack of budget and high prices of properties, it becomes impossible to buy a house without taking a bank loan. This brings in the dreaded EMI nightmare.

Elsewhere, too, the situation is no different. India’s other metros are also seeing a high increase in realty prices, pushing buyers to borrow from the bank to finance their home dreams. At the same time, there are many unsold housing units lying vacant all across the country. Thus, developers are coming up with innovative ways to attract buyers into investing in under-construction and ready possession flats. The biggest indicator of a slump in real estate is the scores of advertisements that developers put out in popular media – as is happening in the metros at the moment.

A builder in Delhi recently announced a ‘no pre-EMI’ clause till possession of the property. Customers are asked to pay 10 per cent as the booking amount, followed by 80 per cent of the amount within 45 days from bank funding. The remaining 10 per cent can be paid on possession. In effect, all the EMIs on the housing loan taken by the buyer are paid for by the builder and the buyer starts paying EMIs only after possession.

Earlier this year, for its upcoming commercial project, another leading builder from Chennai provided an option where consumers paid 40 per cent in three months and took possession of the house, while the balance was to be paid in 15 months. This move pushed sales of commercial premises substantially.

In Mumbai, the developers helming a housing project in Goregaon East decided to offload a series of their unsold flats in Goregaon with a ‘Ready Possession’ clause. The buyers do not take a home loan for the property, and can immediately move in after paying a small percentage of the total cost. The balance can be paid in EMIs to the builder directly, without an additional interest being charged on the same.

Says Dilawar Nensey, Joint Managing Director at the firm, “Since the realty market is down we thought of working out a way for people to be able to buy their permanent dream home as also offload our inventory. We prefer to pass on price benefits to our customers rather than pay heavy interest burden on term loans.”

Another builder in Thane has just announced a housing complex that charges customers as per construction costs, minus the profit margins. “This brings down the cost per house, so more people can buy houses,” the developer explains. Yet another developer in Thane is promising free household appliances like refrigerators and TVs on booking the flats.

But are buyers really buying?

“I am always sceptical of these ‘Ready possession’ claims,” says Shyam Borkar, an architect. “Maybe it is because of my perception that builders are not to be trusted blindly, but I always feel there must be a catch somewhere.” Shyam is about to close a deal on a flat he has booked in Navi Mumbai. “I purchased a re-sale flat because one can never know when the builder will stop construction on a project,” he explains.

Raja Mathur would agree. The garment exporter invested in an under-construction property in Goregaon three years ago, but the work was stalled mid-way owing to permission issues with the BMC. He says, “There is no clarity on when the work will start again and the builder has stopped responding to our calls and messages. I have paid almost 40% of the cost but I don’t know when the project will be completed. I wish I had waited and gathered enough money to invest in a re-sale flat.”

Always examine what the builder is promising, cautions Deepak Vaidya, an investment banker. “Many flats are lying unsold in the city and builders are getting desperate. Some of them will go to any extent to offload the flats. But one must be careful about believing their claims of interest-free payments, paying after possession, etc. They spend crores of rupees on their projects, why will they let the customer use the houses without recovering the cost?”

(Picture courtesy www.topnews.in. Image is used for representational purpose only)

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Houses get smaller in Mumbai

Unable to sell large apartments in a sluggish market, developers are shrinking the sizes of houses while not reducing costs.
by The Editors | editor@themetrognome.in

Since nobody is buying houses in Mumbai and other cities, developers have hit upon a better idea: sell smaller homes. But don’t go running away with the idea that these smaller homes are more affordable. Their per square foot area rate is still unchanged.

As per JLL India Research’s latest report ‘Is Indian Real Estate Heading Towards A Tectonic Shift?’, ‘among the major trends is how developers have been decreasing apartment sizes to suit affordability of buyers.

‘Builders are exploring innovative ways to make residential housing across major cities more appealing to potential buyers at a time when it is increasingly becoming difficult to sell expensive apartments. Unable to sell expensive homes in a sluggish market, builders across India are making smaller apartments without lowering the price per square feet and compromising on the quality of product. In the last five years, average apartment sizes are falling across all major cities of India.’

The report details the Shrinking House syndrome in Mumbai thus: ‘Mumbai Metropolitan Region (MMR) – including Mumbai, Thane and Navi Mumbai – witnessed the maximum fall in apartment sizes on annualised basis, along with Bangalore, Chennai and Kolkata. Other cities also witnessed varying degree of fall in median apartment sizes.’

As per the report, Mumbai, which ‘already had smaller and compact apartment sizes compared to other cities, saw a decrease of 26.4% in the past five years.’ The report adds, ‘The dynamics of apartment sizes have a tale to tell – that developers are paying conscious attention to consumers’ requirements. The fall in average apartment sizes across all top seven cities [in India] is a clear indication that developers intend to make houses affordable for buyers by reducing average apartment size instead of reducing the capital values.

‘While property prices are not purely a product of developer’s discretion, the decision to alter apartment sizes as per the needs and spending power of buyers is definitely within their ambit.’

Read more about this trend on JLL India’s blog.

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