Study Shows Transparency Measures Result in 5-6% Cost Reduction in Real Estate Sector: MahaRera
Mumbai, 16th June 2023: In a recent research essay titled “Do mandatory disclosures squeeze the Lemons? The Case of Housing Markets in India,” scholars from the University of Manchester have concluded that the introduction of the Real Estate Act and the implementation of mandatory disclosures on the website of the Maharashtra Real Estate Regulatory Authority (Maharera) have significantly reduced the cost of housing projects by 5 to 6 percent. This move has brought much-needed transparency to the sector.
Before the enactment of the Real Estate Act in 2016, customers had limited access to information about housing projects. However, the establishment of the Real Estate Authority made it mandatory for project-related details to be posted on the authority’s website during the registration process. Despite the requirement, many states have not yet implemented a mandatory website. Among those that have, only a few states have a separate portal for project information and records of legal cases related to the projects. Maharera stands out as an exception, effectively providing comprehensive information to the public. These findings have been highlighted by the University of Manchester researchers.
Additionally, Maharera has recently made it mandatory to disclose the Director Identification Number (DIN) of all directors during project registration, ensuring that buyers have access to detailed information about their involvement in the projects.
The researchers analyzed data from 2015 to 2020, studying the mortgage documents of 11,557 houses across 972 projects in the Mumbai area. They found that the impact of mandatory disclosures was more significant on larger projects compared to smaller ones, which suffered from a lack of accessible information.
Claims and litigation in the real estate sector are common, with approximately 30 percent of projects in Mumbai stuck in legal proceedings. These legal challenges encompass issues related to land ownership, as well as public interest litigations filed by social groups and organizations regarding environmental concerns, heritage preservation, and legality of permits for additional construction. In the past, such information was not readily available, but now it can be accessed officially. The researchers attempted to search for information on 3,000 projects in Mumbai using Google and successfully obtained details for 2,600 projects in a systematic manner. The researchers further concluded that this increased transparency has empowered investors to make more informed decisions.
The study highlights the positive impact of mandatory disclosures and the efforts of Maharera in enhancing transparency within the real estate sector. By providing crucial information about ongoing legal cases and project details, buyers are better equipped to navigate the market and assess the risks associated with different projects. These measures have not only reduced costs but have also improved investor confidence in the real estate sector.
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