Shubika Bilkha, Business Head at Real Estate Management Institute (REMI)
By Shubika Bilkha, Business Head at Real Estate Management Institute (REMI)
The Real Estate (Regulation and Development Act) RERA, has come into force starting May 1st 2017. The premise of the act has been to bring increased transparency and accountability across the real estate sector that has traditionally been unorganized and fragmented. The act seeks to protect the interest of the consumer, while ensuring greater transactional and delivery vigilance on the part of the developers.
It now incumbent on developers, irrespective of business segment- affordable, mid and luxury, to align their business practices with the stipulations of the Act. While managing any transitionary phase is not without its accompanying challenges, developers need to work fast to equip themselves and their teams with the requisite tools to understand the impact of the regime, structure their organizations and streamline their operating processes to ensure compliance.
One of the key aspects of the project cycle that RERA focuses on is “delivery”. The Act ensures that developers comply with the committed project delivery timelines. Under the Act, developers have to register their projects with all the details by phases, submit the approved plans and meet the completion timeline of each phase to release payments from the project account and avoid penalties. Any changes to the structural plan now require a consent of two-thirds of buyers. Furthermore, the developer is now responsible for structural defects up to a period of 5 years from the date of possession.
The Act also makes cashflow management critical as it limits any collections in advance from buyers (on registered projects) and restricts withdrawals from the project account to the accomplishment of delivery milestones.
For the majority of developers, meeting these stipulations of the Act requires building enhanced delivery capabilities within their organizations. Project management under RERA has now become an essential aspect of the development process. Integration of various departments and teams is now important to ensure RERA compliance. Additionally, with the advent of GST, developers are now incentivized to work with organized vendors and suppliers to get the input tax credit.
It is through optimal project management practices that we at REMI believe that developers will be able to meet their commitments. Project management enables developers to outline the scope of the project, determine the timeline for delivery with the associated cost for effective cashflow management, ensure optimal management of vendors and quality control in the procurement and construction process. Project management practices also provision to streamline communication across all the relevant teams/departments in line with the requirements of the Act.
For a number of real estate companies, this means increasing the number of project managers within their organizations and taking a more structured approach towards development. It also means adopting the right project management tools and newer construction technologies to meet the timeline for completion.
Consumers have often struggled as a result of poor cash flow management on the part of the developer, non-timely delivery of projects and a low quality of construction. With effective project management under RERA, consumers can now benefit from increased transparency throughout the delivery process, as well as quality assurance on possession.
The Real Estate Management Institute- REMI together with the Project Management Institute (PMI) has recently launched a unique Real Estate Project Management certification to skill real estate companies and their employees on optional project management techniques in line with the requirements of RERA.