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India's Real Estate Bill Nearing Approval

Posted by Jose Marc Castro on Mar 09, 2016 08:36 PM EST
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NEW DELHI, INDIA - FEBRUARY 13: Another section of the metro is positioned on the ring road on February 13, 2009 in New Delhi, India. As parts of the capital's metro have opened, construction has gone into its second phase to reach suburbs Noida and Gurgaon in time for the Commonwealth Games to alleviate traffic congestion. (Photo : Daniel Berehulak/Getty Images)

The much awaited Real Estate Regulatory Bill has been calendared recently in the Indian Parliament. This was confirmed in a report from Money Control.com, as reported by CNBC-TV18 Nayantara Rai.

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Amongst the features of the proposed bill include quotes based on carpet area instead of floor area. Stiffer penalties would be imposed on project developers that deviate more than 10 percent from the submitted building plan. The biggest imposition is that developers cannot change anything, even the layout, without obtaining 2/3 vote of the buyers.

There are also provisions that gives the develop leverage in terms of payments.  When a buyer is delayed on their accounts, the interest imposed would be the same as interest imposed on developer delays. This significantly increases the penalties on late payments and provides the developer a means to recoup investments done that should be already be paid up.

The run up to the discussions on the Real Estate Regulatory Bill had caused ripples in other areas of the Indian economy. These include the stock market, which registered a 5 percent jump on last Wednesday's trading.  With consumer sentiment viewing the proposed bill as a means to improve transparency in projects, there is also fear that the bill would further exacerbate delays for these same projects for the near term.

Market experts, as reported on the Economic Times, which include HSBC Global Research, had projected the passage of the bill in both Houses of Parliament and become law in the near future. The firm further noted that the stocks that would gain the most from the passage of the said bill are Oberoi Realty,  Prestige Estates and Godrej Properties.

Overall, the BSE Realty Index climbed 2 percent against the 0.8 percent registered by the BSE Sensex on the same date. Nearly all property stocks listed registered gains with the looming approval of the Real Estate Bill was on the horizon.

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