by Soumya Prakash
Real estate development, or property development, is a business process, encompassing activities that range from the renovation and re-lease of existing buildings to the purchase of raw land and the sale of developed land or parcels to others. Real estate developers are the people and companies who coordinate all of these activities, converting ideas from paper to real property. Real estate development is different from construction, although many developers also manage the construction process.
Developers buy land, finance real estate deals, build or have builders build projects, create, imagine, control, and orchestrate the process of development from the beginning to end. Developers usually take the greatest risk in the creation or renovation of real estate—and receive the greatest rewards. Typically, developers purchase a tract of land, determine the marketing of the property, develop the building program and design, obtain the necessary public approval and financing, build the structures, and rent out, manage, and ultimately sell it. Developers work with many different counterparts along each step of this process including architects, city planners, engineers, surveyors, inspectors, contractors, lawyers, leasing agents, etc.
In India before Real Estate (Regulation and Development) Act (RERA) there were no basic or minimum criteria that need to be fulfilled for being a real estate developer, like no specification with respect to the minimum area of land for undertaking development, no requirement of minimum financial strength for a developer to start a project, no rules for minimum area that need to be constructed in the development. Anybody who has a piece of land – big or small, and who can appoint technical experts and consultants can become a developer. The project can be developed by part-funding from financial institutions/banks or from customers’ advances. For most first-time developers, there is a comfort that a major part of their investment is going into an asset class which over a long time, is only likely to appreciate in value. Hence quite a few with surplus money opted to become developers, irrespective of the risk or the hassles involved.
In India many big names of today in the real estate development like Lodha Group, Godrej Housing, Hiranandani Communities, Raheja Universal, Omaxe, Parshavnath, Supertech, Ansal API, Prateek Group, Sobha Developers etc. started as family businesses.
One cannot be trained to become a Real Estate Developer in India either. Unlike institutes to impart education & training in real estate management, marketing and finance there are no such institutes by far in India. Apex Real Estate bodies like NAREDCO and CREDAI also only offer courses or training modules in Real Estate Management.
Post RERA Scene
As RERA seeks to bring clarity and fair practices that would protect the interests of buyers and also impose penalties on errant builders, the ground situation has changed now.
RERA requires builders to submit the original approved plans for their ongoing projects and the alterations that they made later. They also have to furnish details of revenue collected from allottees, how the funds were utilised, the timeline for construction, completion, and delivery that will need to be certified by an Engineer/Architect/practicing Chartered Accountant. Further it will be the responsibility of each state regulator to register real estate projects and real estate agents operating in their state under RERA. The details of all registered projects will be put up on a website for public access.
Developers can’t invite, advertise, sell, offer, market or book any plot, apartment, house, building, investment in projects, without first registering it with the regulatory authority. After registering the project, developers will have to furnish details of their financial statements, legal title deed and supporting documents. Furthermore, after registration, all the advertisement inviting investment will have to bear the unique RERA registration number. The registration no. will be provided project-wise. This is to restrain fly-by-night operators in the market.
Experts say builders can no more dilute the obligation of companies to comply with RERA. As Banks are going to shut out builders not registered under RERA, this also will act as a deterrent for non-serious people to jump into the ‘developer’ bandwagon.
In the End
At least now in the post RERA scene, people/buyers/consumers can draw solace in the fact that henceforth they’ll be dealing with scrupulous players (developers) with qualifications and experience, etc. rather than unscrupulous ones who were ready to dupe at the turn of events.