Mumbai, June 16, 2023: A recent research study conducted by scholars from the University of Manchester titled “Do mandatory disclosures squeeze the Lemons? The Case of Housing Markets in India” has revealed that the introduction of the Real Estate Act and the implementation of mandatory disclosures on the Maharashtra Real Estate Regulatory Authority’s (Maharera) website have resulted in a significant 5 to 6 percent reduction in housing project costs. This move has brought much-needed transparency to the real estate sector.
Prior to the enactment of the Real Estate Act in 2016, customers had limited access to information about housing projects. However, with the establishment of the Real Estate Authority, it became mandatory for project-related details to be posted on the authority’s website during the registration process. While many states have not yet implemented a mandatory website, Maharera stands out by effectively providing comprehensive information to the public through a separate portal for project information and records of legal cases related to the projects. These findings have been highlighted by the University of Manchester researchers.
In addition, Maharera recently made it compulsory 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, examining the mortgage documents of 11,557 houses across 972 projects in the Mumbai area. They found that the impact of mandatory disclosures was more pronounced on larger projects compared to smaller ones, which often suffered from a lack of accessible information.
The real estate sector is often plagued by claims and litigation, with approximately 30 percent of projects in Mumbai being 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 concerning environmental concerns, heritage preservation, and the 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. Maharera’s commitment to transparency and accountability has set a positive precedent for other states to follow in order to create a more transparent and reliable real estate market.
