Small brokers worried over impact of new realty law

Tightening the noose Brokers need to be aware of what they are selling and may face penalty for mis-selling to consumers

Move will see consolidation among broking firms, bring transparency in deals: industry watchers

Mumbai, April 30



Daulat Ram, a real estate broker who has a small office in a bylane of Janakpuri in Delhi, is a worried man. Ram, who deals in both secondary and primary real estate, says the Real Estate Regulatory Act (RERA), which comes into force from May 1, may have an impact on his business.

As per clauses in the Act, not only will developers have to play fair but brokers also need to be aware of what they are selling and may face penalty for mis-selling to consumers.

Earlier last week, Union Housing Minister Venkaiah Naidu said that all the real estate projects and property agents have to be registered with regulatory authorities by July 31.

Real estate sector watchers say that this will lead to consolidation even among broking firms and possibly weed out fly-by-night operators. Players like Daulat Ram currently account for as much as 65 per cent transactions in the secondary or resale market and close to 20-30 per cent in the primary or new properties transaction, according to various industry data.

All the States are required to notify RERA rules and establish the regulatory authorities and the appellate tribunals by April 30. So far only 13 States have introduced the new regulations.

BusinessLine spoke to a cross-section of brokers in the industry and most of the hailed the step, but many also indicated that smaller businesses are likely to be affected.

Anuj Puri, Chairman, JLLR (a brokerage firm for residential real estate), says, “Even property brokerage houses will come under the ambit of RERA, meaning that agents or agencies operating in smaller pockets who did not hesitate to foist inferior or flawed properties onto their clients will be wiped out. No longer will buyers, who used the services of such brokers in the past, risk having properties whose defects become evident only after the deal is done.”

Sahil Vora, MD, Sila, a transaction advisory platform for real estate, says the Government is bringing accountability in the system.

“Smaller brokers used to mislead customers. All such practices will come to an end,” Vora added. The Indian realty broking market is estimated at ₹15,000-20,000 crore. As estimated five lakh agents operate out of top 15 cities.

Several broking firms have already started training their staff and also keeping proper documentations of transactions to ensure transparency.

In addition to mandatory registration of projects and real estate agents, under the new rules, developers have to deposit 70 per cent of the funds collected from buyers in a separate bank account for construction of the project. This is aimed at timely completion of the project as the funds could be withdrawn only for construction purposes.

Published on April 30, 2017

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