The Tamil Nadu Real Estate Appellate Tribunal (TNREAT) has upheld a ruling by the Tamil Nadu Real Estate Regulatory Authority (TNRERA) that SEZ projects and estates involving the sale of industrial land parcels to investors come under the Real Estate Regulatory Authority (RERA) Act. This verdict from the case of the GMR Krishnagiri SIR Ltd that is establishing a SEZ in Hosur in the Krishagiri District of Tamil Nadu, has implications for the real estate sector in Tamil Nadu.
According to a report published in The Hindu, “RERA does not exempt the sale of industrial plots from the definition of the Act. Maharashtra and Tamil Nadu have adopted this definition.”
Regulating the activity
“The Tamil Nadu Real Estate Appellate Tribunal upheld a ruling that industrial projects come under purview of RERA. This means that the state RERA considers all immovable properties under its purview. This is definitely good from the perspective that there will be all-round transparency and efficiency in the state’s real estate sector, and the scope of RERA is not just limited to commercial or residential buildings. This leaves little room for any misadventure in the industry as a whole,” informed Sanjay Chugh, City Head – Chennai, ANAROCK Property Consultants. He added, “If we consider the actual definition of an ‘apartment’ or immovable property to be included under RERA as defined in the Tamil Nadu RERA Act or even the central legislation, then the term ‘industry’ has not been used in its context. Although, there were recommendations to the Union government to include the same when the central legislation was being formulated back in 2016 but the Act did not mention the term ‘industry.’ Instead, it stated that apartment includes any immovable property….used for any residential or commercial use such as residence, office, shop, show room or go down or for carrying on any business, occupation, profession or trade, or for any other type of use ancillary to the purpose specified. Hence, there was an ambiguity whether industrial projects are included or not. Most states followed this definition including Tamil Nadu.”
According to Salman Dawood, Monarch Group, Bangalore, “The RERA being the apex regulatory framework for protecting buyers in the real estate sector, in essence is entitled to protect buyers, whether they are purchasing commercial or residential property. Though the rules of Karnataka RERA do not explicitly mention industrial projects, it can assume suo moto powers to protect consumers.”
Monarch Group is a family-owned business based out of Bangalore. According to Dawood, “We have constructed a wide range of projects varying from office, hotels to residential spaces with over 1 million square feet of quality spaces successfully completed under our belt. We believe in steady and sustainable growth and do not believe in over-committing, hence we take up one marquee project at a time.” The group is presently constructing Monarch Aqua, a premium residential and retail project overlooking the serene KR Puram Lake on Old Madras Road.
W. S. Habib, President, CREDAI Chennai, feels that RERA is ideally meant for regulating residential builders and buyers as there used to be a lot of ambiguity among the builders and promoters. He stated, “Much discipline has come into the trade after RERA. Consumers now can confidently invest their money in projects that come under the purview of RERA and CREDAI. When it comes to industrial or commercial properties, most of them are either leased or rented to those occupying it. As long as there is clarity and it helps the end user, such regulations are welcome.”
CREDAI has worked hard to make the industry more organised and progressive by networking closely with government representatives, policy makers, investors, finance companies, consumers and real estate professionals.
Current scenario in residential sector
There are a few reports which show a large inventory overhang in Bangalore but these do not accurately give much information about the supply. For example, most reports do not mention how much of the inventory is completed and how much is under construction. This information would shed light into the adaptation of consumers to a more conservative stance wherein the consumers are preferring completed projects and are holding on to their money until they are sure of the project being completed.
According to Dawood, “Demand is constantly changing but the one distinct change that is worth noting is that at which point of the project lifecycle consumers are willing to part with their funds. We have observed that the projects nearly sell out themselves after they reach a reasonable level of completion, subject to obvious demand drivers such as price point and location.”
In Chennai, the supply is always a little more than demand. Habib stated, “This is a healthy trend as lack of supply may sometimes push up prices. Right now, the prices are also reasonable and affordable in most of locations. Most large scale multi-storeyed apartments are all coming up in the suburbs where infrastructure development is also taking place. Within the city, most of the apartment complexes range from six to twelve flats per property.”
So, is there a slump? What measures are being taken by builders and promoters to counter the effect?
Dawood stated, “A slump would imply that there has been a fall in prices and profits by real estate developers, which if you read the quarterly results of any leading developer who is publicly listed, shows the completely opposite picture. There is only a change in consumer sentiment to being more cautious from the positive sentiment we have been so used to seeing in the past decade. Builders and promoters are further reinforcing their commitment to the customers by ensuring that the projects they have set out to complete will meet fruition as this is more valued to the consumer than the so called unbelievable offers.”
Habib firmly believes that if a project is completed according to schedule, buyers will be happy and payments will not get held up and price escalation will not take place. He added, “Most of the recently launched projects are all getting sold because of disciplined construction activity. It is when the project gets delayed that all other factors – bank interests, for instance – add up to push up the prices. After a long time, the real estate market is looking up.”