The Real Estate (Regulation and Development) Act, 2016, or RERA, turned a year old. The Real Estate (Regulation and Development) Act, that seeks to safeguard home buyers, was passed by Rajya Sabha on March 10, 2016 and by Lok Sabha on March 15, 2016. On May 01, 2017, the Union Ministry of Housing and Urban Poverty Alleviation notified all the 92 sections and the Real Estate Act came into force after almost a 9-year wait marking the beginning of a new era in the Indian real estate sector.
After its first anniversary, it’s imperative to have a check-up of to see if RERA has achieved what it set out for.
RERA encountered many apprehensions in 2017. And one year down the line, some were ruled out and some of these seems to have grounds. RERA has boosted the buyer’s sentiments, enhanced more transparency but dwindled the real estate market which is nevertheless quite needed. The good news is that slowly consumers are becoming aware of protecting their interests and will start using provisions under RERA to ensure that their dream home doesn’t remain just a dream.
RERA is applicable to all states, except Jammu and Kashmir. As many as 20 states have notified the RERA rules so far. Some are still left. Though every regulator is mandated to have an online portal within one year of the notification but so far only 14 out of the 20 states, have a functional website and only three states have a permanent regulator. In Gujarat, an appellate tribunal has been set up. Nine states and union territories have appointed interim appellate tribunal under the Real Estate Act.
As per the Act, developers, projects and agents had time till July 31, 2017 to mandatorily register their projects with the Real Estate Regulatory Authority. Any unregistered project would be deemed to be unauthorized by the regulator.
The real state sector was left to chase compliance instead of business for the first six months in 2017. Transactions remained flat and the market shrunk. However, on the other side, RERA has been instrumental in bringing back consumer confidence. Though the primary market has shrunk to a size of about 200,000 units per year and the secondary or resale market to about 350,000-400,000 units. Hopefully, with RERA bringing back consumer confidence, one can see the market gradually bounce back in a year, which is much needed for a country of our size.
On the other hand, due to stringent provisions of RERA, non-serious developers are finding it difficult to sustain and will eventually move out.
Developers cannot invite, advertise, sell, offer, market or book any plot, apartment, house, building, investment in projects, without first registering it with the regulatory authority. Thus, is another reason why builders are keen on registering their projects. The number, type of apartments, plots and projects and their completion status will be updated at a maximum quarterly basis on the RERA website.
The problem of delay in delivery is sought to much extend. If the builder fails to deliver within the specified time frame, he will be required to return the money invested by the buyers along with the pre-agreed interest rate mentioned in the contract. However, if a buyer chooses not to take the money back, the builder will have to pay monthly interest on each delay month to the buyer till they get delivery.
The Act makes it mandatory to the promoters to deposit 70 percent of the customer advances or project funds into a separate dedicated project account so that these funds are utilized for acquisition of land as wel I construction of the related project. The withdrawals f ro m the account need to be certified by the project engineer, architect and chartered accountants and these accounts are to be audited every financial year and copy of the same needs to be submitted to the authority. This mechanism ensures that the customer advances are not diverted towards other project development and the promoters do not delay the project on account of lack of funds.
In the top 10 cities, there are around 45,000 developers and one shouldn’t be surprised if the market is ultimately left with fewer than 20,000 developers. This consolidation will not only bring in more professionalism but will also boost consumer confidence as buyers start dealing with organized entities that see a longer stake in the business.
What statistics says!
In Karnataka, the RERA Help Desk has received more than 100,000 queries on property-related issues and around 572 projects are under investigation. In Haryana, the RERA authorities have registered over 150 complaints on delay in delivery of possession and buyers seeking refund. In most cases where home buyers are seeking refund, they are also demanding interest on the deposit as developers have failed to deliver the projects. In Madhya Pradesh, out of 1,700 RERA-registered projects, cases have been filed against 1,100, and 500 cases have been disposed till now. Violator developers have been booked in Maharashtra, Bihar, Haryana, Uttar Pradesh and Karnataka In Maharashtra, conciliation committees of builders and buyers and RERA authorities are trying to sort out problems that can be resolved through conciliation. The fact is that consumer complaints are now being heard and addressed.
Nevertheless, Real Estate (Regulation and Development) Act, 2016 (RERA) no doubt was the much-awaited legislation and is definitely bringing out the transparency and accountability in the real estate sector. But the question of the hour is how far the dispute resolution mechanism in RERA is going to be successful. The onus is on the buyer to make sure that he is entering into a contract with a credible builder or not. In addition, the piece of land in question may be under litigation. The buyer should carry out an extensive builder verification and check with various online real estate forums. Another big call is to educate the buyers about RERA and their rights for the ultimate success of this revolutionary legislation. A huge 74% of potential homebuyers said they did not know how to check the RERA status of their project in one of the survey conducted by Livemint. This does point towards a gap existing in the Act’s implementation and consumer seeding. RERA is gradually improving sentiment and property seekers are coming back to the market after having stayed away for a larger part of 2017.
(Author is associated with Mamta Binani and Associates and can be reached at email@example.com )