Towards Healthier NCR Realty Market

Excerpt from Sotheby’s International Realty white paper on improving the transparency and regulation in Delhi’s Realty market that was shared with Chairman, Delhi RERA. The National Capital of Delhi, a union territory with an elected government enjoys a special status. It’s the capital city of India and a prosperous one at that, with Delhi’s per capita income the second highest in India. The per capita income of Delhi during 2020-21 is estimated at Rs. 3,54,004 against a national per capita income of Rs. 1,27,768, according to data presented in Delhi’s economic survey. Thus Delhi’s per capita is almost three times of the national average. The total purchasing power of Delhiites has grown by 37% in the last ten years, making it one of the top economic hubs of the country. With rising economic wellbeing, come rising aspirations. It’s a dream come true for almost everyone living in Delhi, to own a home. Delhi government’s revenues earned from stamp duty and registration fee have been consistently rising and despite the pandemic, Delhi’s real estate market witnessed robust transactions. Stamp duty and registration fee revenues have gone up from INR 4606 crore in 2019-20 to INR 5297 crore in 2020-2021, according to the budget presented by Delhi Government. Despite the robustness in revenues and transactions, the on-ground situation of Delhi’s real estate re-mains worrisome at some fronts. Real Estate Regulation Act or RERA has failed to adequately protect Delhi home buyers. According to a report aggregated by an independent property consultant, the total number of projects registered under various state RERAs nationwide as of November 2021, were 71,307 projects. In Delhi RERA however, only 32 projects were registered. This number of RERA registered projects in Delhi is not only amongst the lowest in any Union Territory, it also falls dismally short when compared with RERA registered projects of cities like Mumbai and Bengaluru. There are leading gaps and areas of non-regulation in Delhi’s real estate market which allow builders in the national capital territory to escape RERA registration. Extremely low number of project registrations under DELHI RERA should be a cause of concern to all authorities/stakeholders. A sector can only flourish when the consumer or the customer feels safe. A home is one of the biggest purchases and financial commitment for most Indians. Non-RERA registra-tion allows builders to escape any scrutiny and has led to significantly higher numbers of delayed projects, disputes, and property litigations. One sided agreement to sell by developers are rampant, and put the customer at a very high risk. Recommendations to Bring Transparency and Accountability The government should consider reigning in General Power of Attorney or GPA registrations unless related by blood. Blanket banning of GPA registrations may not be feasible as they could hamper Non- Resident Indian or NRI sellers, who do execute their sales through GPAs. Keeping that in mind, we recommend that only registered and apostilled POAs should be considered for sale and registration.

• There is an urgent need to amend the RERA Act, to include 200 square meter or 4 floor development. Experts opine, almost 90% of Delhi’s residential market would be covered with this one crucial amendment. RERA registration should be made mandatory for all residential developments in Category A colonies, irrespective of size, number of units or any other exclusion that the builder might use.
• Under provision to Section 3(2) the State Government does have the power to reduce these thresholds and cover projects less than 500 square meters or 8 apartments. Thus, State Government should consider notifying lesser thresholds and cover more projects under RERA.
• A RERA registration number should be made a prerequisite for approving building sanction plans, completion certificate, and registration of sale deed.
• Recognition of compliant builders and agents on RERA website will increase aware-ness and benefit home buyers in choosing the right people. Delhi RERA could facilitate or bring to prominence such projects.
• Agent name and RERA registration number should be mandatory in all property transactions involving an agent. Ideally every sale document should have agent details and its RERA registration number, to ensure proper implementation.
• Delhi RERA is planning a campaign to drive higher awareness of RERA amongst home buyers, and we welcome it. Making home buyers aware of the risks of buying a non RERA registered project or from a non RERA registered broker, will go a long way in cleaning up the market. We recommend the Delhi Government to consider a 0.25% discount on stamp duty for RERA registered projects. This single step will immediately boost awareness and incentivize home buyers to opt for RERA registered projects, forcing builders to register.
• One of the key changes implemented by RERA is the imposition of an escrow for all RERA registered projects. It compels developers to transfer 70% of the money received from customers be kept in an escrow account maintained with a scheduled commercial bank. This particular provision prevents developers from siphoning off funds, using funds for other developments or buying fresh land. This one clause mitigates the risk of insolvency. It is critical for Delhi RERA to monitor that this rule of an escrow ac-count is followed rigorously.
• We also recommend that various agreements such as Agreement to Sale and sale deeds, are standardized. While RERA Act stipulates that, the practice is not being followed. Delhi RERA website does have a model agreement for sale, which is rarely followed by builders.

Rationalization of circle rates across different categories is another impending matter. The Delhi government has already started the process for revising the circle rates of properties, seeking feedback from the public. A committee of senior officials of the Revenue department is evaluating the circle rates of different kinds of landed properties and is to submit its report to the government. The circle rates in Delhi were last increased in 2014 and are currently out of sync with market realities. We recommend that the department looks at creating subcategories within the A-H categories, where needed. Given that Category A circle rates are over 3 times of category B, places like Lutyens, Westend and Shanti Niketan should be called A+ at current rates of A and places like Vasant Vihar, Panchsheel Park should move to A at 4.0 lacs per sq yds to reflect the ground realities. We also propose an alternate solution in the long term, for reducing the dependency on circle rates. We recommend that all property transaction values be published online on the revenue departments website. A simple search on any pin code, should immediately throw up the last 10 transactions, giving people a clear picture of what the market demand supply dynamics are. More importantly, such transparency measures will amplify the outliers, making it difficult to register any property at prices lower than transaction price It is time that all home ownership records are digitized and made available to every citizen of Delhi to cross check the title of a property and safeguard himself or herself. Delhi Government has made huge progress on taking the most important services for Delhiites, online through various measures. It must now move in the direction of online digital records of home and land ownership.