Real Estate Regulatory Act (RERA) is foreseen as a game changer in the Indian commercial real estate sector with all stakeholders profiting from a win-win situation. The different stakeholders of commercial real estate are generally the developer, retail investor and office occupier.
For the developer, it would mean more compliance and bringing in company and project-related details accessible to both the government and customer.
For office occupiers, RERA will bring in the much-necessary transparency and the regulatory framework that would offer a chance to do a fair comparison between projects.
The retail investor generally invests in under construction commercial projects for assured return. A direct impact of RERA will be that assured return guarantee schemes will disappear and mostly impact Grade B developers who will be stressed for funding and subsequent project completion.
With RERA coming into power, agreements between various parties, i.e. land owners, developers and financial investors, may go through changes in line with the provisions of the Act.
New sectors such as e-commerce, logistics and start-ups are rising as major drivers of commercial real estate besides the IT and ITES companies which have traditionally driven office space requirement.
RERA gets implemented at an advantageous time as office demand is observing an uptick not only in the top 7 Indian cities but also in tier-II cities of the country thanks to both start-ups and SME sector. These sectors are foreseen to consume more space going forward. Although availability of right space at right location remains a question for many occupiers, about 38-40 million sq ft of new space will be added in 2017.
Tier-II cities such as Pune and Hyderabad will also drive demand for office space in 2017. In Hyderabad, good demand is expected from both MNCs and start-ups.
With transparency, FDI will receive further assist as confidence triggers higher inflow into the Indian real estate market. Along with that, the existence of Real Estate Investment Trusts (REITs) becoming a reality soon has led to increased participation by private equity in the sector, giving developers the much-needed funds as well as exit opportunities from completed projects.
Commencement of RERA will add to the investor trust. Even fast growing working space too will get a boost from the Act as officer seekers, even those who are seeking offices for just one or two people, have better access thanks to increased transparency in the working of the industry.
Thus RERA has come at an advantageous time and further reinforce the real estate industry in the country in the future years.