Real Estate Regulatory Act (RERA) has been finally implemented from 01st May 2017, this act will help bringing in the much needed transparency and setting accountability in the unorganized real estate sector. Under this act, construction companies or builders will have to deposit 70% of the funds collected from the buyers in a escrow account (separate bank account) in case of new projects or 70% of unused funds in case of on going projects. Builders will now have to get all the ongoing projects and future new projects to be registered with the regulatory authority.
This act will help to improve the transparency and also play a major role in strengthening the alliance between home buyers and builders. For builders this Act may create a short-term liquidity crunch,the unorganised small and local builders and larger players with over-leveraged balance sheets will have to brace for it.
Two out of the top five listed real-estate developers have a higher debt-to-market capitalisation ratio than the industry average (1.10).
With boosted optimism in this sector, S&P BSE Realty index surged by 47% (YTD).