The General notion amongst the Builder Community is that The Real Estate (Regulation & Development) Act, 2016 (RERA) has been enacted to kill the Real Estate Industry. The strict regulations & the unending compliances have discouraged, daunted & disturbed the Real Estate Builders and Developers throughout the country. The small & medium builders, who are neither technically nor legally sound, are the worst sufferers. In fact most of the existing small/medium sized builders are seriously planning of diversifying into other businesses, once their existing projects are completed. The recession in the Real Estate sector, poor sales & the reservation of the buyers to invest in Real Estate has added to the vows of the builders.
The notion that RERA is a solely meant as a tool for the grievance redressal of the allottees/ buyers and enacted to kill the Real Estate industry is highly misconceived. Housing is an indispensable need of the people and the present Government is investing heavily to meet the Housing & Infrastructure needs of the people. The real estate sector has a very important role to play in addressing the housing needs of millions in urban & rural India. The Government which has a huge budget for grant of subsidies to the tune of 19000 crores for FY 2019-20 under the PMAY cannot be blamed for throttling the housing sector. RERA is a new enactment and there is still less clarity & understanding of this law leading to fear psychosis amongst the Developers.
It is true that in the past decade, real estate prices had shot up steeply. There has been a lot of speculative investment in the real estate market. People had invested heavily in upcoming projects with an intention to make huge profits in short span of time. This has lured innumerable fly by night operators to enter into the real estate market as builders/ developers. They gave attractive advertisements, made false promises and assured their allottees of guaranteed returns & buybacks to lure the investors. These new entrants collected a lot of funds as booking amounts & installments but failed to fulfill the promises made to the allottees. Their projects were stuck up. The money collected for running the projects were siphoned off. The hard earned money of the allottees was looted by these companies. This was one of the compelling reasons for the Government to bring in new & effective Regulations for the real estate sector to curb these malpractices. RERA has brought in Accountability, Transparency, Uniformity, Clarity & Efficiency in the Real Estate sector. With the operation of RERA, the money collected from the Allottees has to be utilized for the construction & development of the project and cannot be siphoned off or diverted in other businesses.
If we see the aims & objectives of RERA, it has been enacted “for regulation & promotion of the real estate sector”. It should be borne in mind that the Regulatory Discipline is imminent for the growth & promotion of any sector & RERA has been brought to bring discipline in this sector.
RERA is an act which is bound to be beneficial to the allottees/buyers, beneficial for the Builders/Developers, beneficial for the promotion & development of Real Estate Sector, beneficial to the Government & beneficial to the Legal system in as much as it reduces the burden of the Civil Courts. The only shortcoming of RERA is the multiplicity & impracticability in compliance, making the same tedious, time consuming & often frightening. If the Builder is honest & law abiding and does not wish to deviate from the sanctioned building plans, adhere to the specifications as per the agreement, uses proper building material and is quality & time conscious, RERA provides him a win- win situation. The biggest advantage to the Honest Builders is that the unscrupulous builders who were doing unauthorized construction have fled the market as they could not meet the compliances under RERA.
RERA has changed the entire scenario both for the Allottee & the Developer. All the relevant documents like Purchase Deeds, Sanctioned Plans, various NOC’s, Construction targets & progress, Status of completion certificate etc. are available at the RERA website making the process fully transparent. Thus the prospective buyer becomes fully aware of the minute details of the desired Project.
The best feature of RERA is that it provides for Conciliation Forum where a committee consisting of representatives of the Association of Developers & the Allottees sit together to resolve the disputes. In Pune alone, the success rate through conciliation is 90%. This saves the precious time of the Tribunals & the Courts.
Moreover, the unregistered agreement between the allottee & Developer has mandatorily given way to duly registered Agreements u/s 13 of RERA, which legally binds both of them. Unlike the unregistered agreement, this has legal sanctity & is legally enforceable. As per section 14 of RERA, the Developer has to adhere to the sanctioned plans & project specifications. RERA has given Rights to the Allottees but at the same time it has thrust duties/ obligations on them. On one hand the allottee is entitled to interest at the prescribed rate for the period of delay but at the same time he is liable to pay interest at the prescribed rates for the delay in payment made by him. Thus both the developer & the allottee have been kept in parity and are to maintain financial discipline in a time bound manner.
The RERA authorities throughout India are only talking of strict regulation in RERA but they are missing the more important that is the Development part of the Real Estate Sector. The following issues facing the Real Estate Sector need to be addressed:
* meet the present day challenges
* Growth strategy for its revival
*Easy Availability of Finance for the Real Estate Sector
*Possibilities of forming synergies between the Housing Industry & the Regulatory Authorities
*Availability of lands especially after the amended Land Acquisition Act coming in force
* Growing need of Consumer protection
* Strengthening of legal framework of RERA
One of the issues which need concern of the Government is the penal provisions contained in RERA. All penalties contained in Sections 59 – 68 are based on a percentage of the project cost. The quantum of penalty has been linked to estimated project cost which is illogical, arbitrary & legally not sustainable. This prima facie does not appear just & reasonable. This works out to be a hefty amount. It is fair & just that the Penalties are moderate and only habitual offenders are punished. The authorities should see the “mens-rea’ behind every default. If the Developer is prevented by reasonable & sufficient cause, no penalty should be imposed. Moreover, the levy of penalty should not be mechanical but only after application of mind judiciously. It is also imperative that no penalties should be imposed for technical breaches. It would be trite to refer to the judgment of the Apex Court in Hindustan Steel Ltd vs State Of Orissa 1970 AIR 253, 1970 SCR (1) 753 which has held as under:
“The discretion to impose a penalty must be exercised judicially. A penalty will ordinarily be imposed in cases where the party acts deliberately in defiance of law, or is guilty of contumacious or dishonest conduct, or acts in conscious disregard of its obligation; but not, in cases where there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.”
The worst period of Real Estate is over. The Golden period of Real Estate Development is on the anvil & RERA is bound to play a complimentary role in the growth of this sector.