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Construction : Web Exclusive | May 2018 | Source : CW-India

Maharashtra Government suggests to include real estate companies under MPID Act

The Maharashtra Protection of Interest of Depositor Act (MPID) is mainly to book those who float Ponzi schemes and focused to recover investors’ money. The suggestion by the Maharashtra Government to include real estate companies in the Act is a direct measure on the Central Government’s decision to term assured returns in real estate investment as ‘ponzi’ schemes. The Central Government’s primary intention is to safeguard buyers’ or investors’ interest. However, this will imply that there will be a loss of cheaper funding sources for developers. Today, the cost of funding can be anywhere between 15 per cent to 25 per cent for Tier-II developers, which is much higher than the 9 per cent to 12 per cent that investment schemes of this nature would command.
To ensure that the investment schemes are safe, real estate developers should ensure they take cues from SEBI regulations. Further, it is important that developers and projects are registered with the state RERA Act, which will ensure that they comply with statutory requirements. A rating system could be devised for developers, on similar lines of stocks and credit ratings. This independent rating system would rate companies on parameters such as construction risk, legal risk, financial risk and marketing risk. A strong rating for companies will be a definite way of attracting investments, both from institutions as well as on the retail level.
About the Author:
Ramesh Nair is CEO and Country Head at JLL India.


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