How does knowing carpet area help?4 min read . Updated: 08 May 2017, 07:45 PM IST
RERA requires developers to sell units only on the basis of carpet area, and not built-up or super built-up area
The Real Estate (Regulation and Development) Act, 2016, is now in force. It requires developers to sell units only on the basis of carpet area, and not built-up or super built-up area. How does this help homebuyers?
Tejas Patil, head, real estate services, Sanctum Wealth Management
RERA has mandated developers on how they should sell apartments based on the carpet area. The Act defines carpet area as the net usable floor area of an apartment within the external walls but excluding services shafts, balcony, verandah or open terrace areas appurtenant to the usable area exclusively for the apartment owner.
This normalization of the definition will stop unprincipled developers from misleading buyers. Case in point: With a higher loading factor, the developer can inflate the saleable area. This gives him room to seemingly lower the rate per sq. ft on the inflated saleable area. This is highly misleading since buyers get enticed assuming they are getting a better-than-market offer. However, the flat size has not changed; only the loading factor has changed. The same carpet area of, say, 1,000 sq. ft has over a period been sold as saleable area of 1,400 sq. ft (when the loading on the carpet area was lower) or as 1,700 sq. ft at present, with higher loading percentages. The actual flat area remained the same and yet developers found an easy way to get more out of the purchasers.
Using carpet area as the standard will bring certainty on the exact usable area and allow him to analyse the price per sq. ft. It also becomes easier to compare apartment areas across projects in the same micromarket and make an informed decision before booking a unit.
Dhruv Agarwala, CEO, PropTiger.com, Housing.com and Makaan.com
The passage of the Real Estate Regulatory Bill comes as a much needed intervention that will restore transparency and trust to the sector. By attaching penalties to project delays that will lead to an increase in the timely completion of projects, the Bill addresses one of the key concerns faced by home buyers.
Further, accurate information on the status of the land, site and layout plan, schedule for completion of the project and details regarding different approvals from various government departments will empower the buyer to make an informed decision. However, the primary issue faced by most homebuyers has been the lack of clarity on the exact carpet area of the property.
In the past, several buyers have felt short changed by buying on ‘super build-up area’ which is often 30% to 40% higher than the actual apartment dimensions. By making it mandatory to share data on ‘carpet area’, the homebuyers will now clearly be able to see what they are paying for. Disclosure of carpet area upfront will bring more transparency, provide a common yardstick for comparison of projects and fasten decision making .
Therefore, it’s a paradigm change in a sector that was long plagued with trust deficit. Within a span of a few months from implementation in all states, the real estate industry will see an upswing in buyers’ confidence and is expected to aid demand revival.
Samir Jasuja, CEO & founder, PropEquity
RERA is a good and long overdue step. The rules will bring sanity and fair play into the developer-buyer equation. With its implementation, we foresee the sector becoming more transparent and the developers more accountable. Homebuyers will finally be able to bid goodbye to inordinate project delays, shoddy quality of construction and extra cost. Selling on the basis of carpet area would mean that buyers know from the very first day the exact area they’ll get and the amount for the same. This also means that developers will not be able to increase the price by way of increasing the saleable area in the later stages of development of the project. This makes the process much more transparent and the pricing static.
Selling on the basis of carpet area should not lead to developers providing lesser amenities to the buyer as this would lead to their project becoming uncompetitive.
The issue of carpet area was one of the most controversial for many projects leading to expensive and tedious legal tussles. We will now see far fewer cases of mistrust.
It is now time for homebuyers to invest confidently in real estate. By end-2017, we are expecting green shoots in housing demand revival. We strongly believe that developers with good track records, strong financials and low leverage to external debt will perform better.
Samantak Das, chief economist & national director-research, Knight Frank India
The residential sector has been staring at a free fall in terms of sales volume for the past 3 years. For the past 1 year, even though prices have undergone correction, interest rates have come down and the economy is performing along a much better growth trajectory, and the return of homebuyers is not visible. This can be attributed to lack of confidence in them in terms of project completion and delivery, and absence of a strong real estate specific authority to provide recourse if there is deviation from the agreement.
The main objective of RERA is to bring in transparency and do away with information asymmetry.
The insistence of RERA to sell everything based on carpet area will definitely bring in clarity to the most opaque issue a buyer faces—what area is the buyer getting as per the agreement? In the pre-RERA era, buyers did not have proper understanding of the terminology that developers used, such as super built-up, built up and carpet area, as these were not defined clearly. RERA has removed the ambiguity in the definition of carpet area. This will bring confidence and clarity to buyers and allow them to take an informed decision.
By making it mandatory for developers to sell apartments only on the basis of carpet area, RERA will address the most important concern of a buyer—how much liveable space will I get?