RERA - Transforming the Indian Real-Estate Sector
What is the Meaning of RERA?
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RERA is an abbreviation for Real Estate Regulatory Authority, which came into force in May 2017. It ushered in an era of transparency and accountability in the Indian real estate sector. The Real Estate (Regulation and Development) or RERA Act, 2016 has provided legal provisions for the Real Estate Regulatory Authority setup across all states, which will act as an adjudicating body for dispute resolution. In 2018 (one year after RERA), India climbed in the World Bank's ''Ease of Doing Business'' with a significant jump from 100th position to 77th rank, becoming the top South Asian country for the first time. Here, the biggest gainer was ''construction permit''; India climbed from 181st to 52nd rank. Let us explore some of RERA's key provisions, its benefits, impact, and way forward.
Real estate and allied activities are the biggest employers in the country after agriculture and housing. Unfortunately, India had no legal regulatory authority for nearly 70 years since independence! This glaring gap left many loopholes in the system for different players to exploit. RERA was necessary due to the following reasons:
• There were no standardized procedures, and the sector was highly fragmented and unregulated. This gave a broad scope to many players of the real estate sector to abuse the market.
• Previously, the developers would launch their projects; however, there was no guarantee that the said project would be completed within the stipulated time. This left many buyers and investors sceptical about investing in the real estate sector. Many home buyers would also be left in a lurch as the projects they would invest in would not be completed on time.
• Grievances would usually be addressed in the Consumer court; this would result in a cumbersome process. In many instances, cases would drag along for years together, resulting in a poor rate of disposal of cases.
• Many financial institutions, such as banks, would fund builders, and eventually, they would be unable to recover their loans. This led to mounting up of bad debts resulting in crippling of Indian economy as the Non-Performing Assets piled up.
• Rampant use of black money was unaccounted for till now, and this was possible due to the various existing loopholes and lack of transparency.
• There was a lack of transparency in the real estate sector. This information asymmetry led to many scams and frauds. It also led to a rise in the cost of projects if their delivery was late.
These factors prompted the government to resolve the issues of rotting the real estate sector for decades. Hence came in RERA. This watershed move led to the establishment of India's first regulator for the real estate sector. The matters pertaining to land and urban development come under the state list, the union government has only Delhi and Union Territories under its ambit. The union government formulates national policies in this domain and assists the states through various Centrally Sponsored Schemes. The RERA Act has made it mandatory for the states to establish their own regulator, thereby standing to the principles of federal democracy and promoting decentralization of power.
Key functions of the Real Estate Regulatory Authority under RERA Act:
1. Composition of members - The authority shall have primarily 3 members – Chairperson and not less than 2 full-time members who shall be appointed by the appropriate government.
2. The authority shall promote a transparent and competitive real estate sector by making appropriate recommendations to the government (although these decisions are non-binding).
3. RERA shall protect the interests of all three parties related to the project – buyer, promoter, and real estate agent.
4. RERA shall create a single-window clearance system for speedy approval and clearances.
5. The authority shall promote construction which is environmentally sustainable
6. RERA shall promote affordable housing and include measures to provide financial assistance for the same.
7. The authority shall establish dispute settlement forums, which will facilitate amicable solutions between the buyer and promoters. This dispute settlement forum shall provide fast-track solutions for the settlement of disputes.
8. The authority shall promote the digitization of land records in the state.
9. RERA shall maintain a database of records for public viewing. They shall contain details of registered projects of promoters and agents.
10. The authority shall ensure that its directions are being abided by the respective parties, failing which the authority can levy a fine.
As we can see, the above points concerning the functions of RERA have promoted the basis for efficient and citizen-centric governance. The establishment of the Real Estate Appellate Tribunal has also given the provision to seek a second hearing in case any of the parties are not satisfied with the authority's judgement.
Benefits under RERA for buyers: -
1. Mandatory inclusion of disclosure of ''carpet area'' has helped the buyer to know the exact details of the project. It has directly curbed the unfair practices and activated the promotion of informed choice-making decision for the buyer.
2. Fast-track courts have led to a speedy resolution and settlement of disputes. It also has the provisions of levying penalty on the builders in case the project completion is delayed or information provided is compromised with.
3. The act has also promoted standardization in construction quality. The buyer is ensured of the quality of construction. If, in any case, quality issues arise within 5 years, the developer will have to fix the changes within 30 days.
Benefits under RERA for builders/developers:
1. The provisions of the act protect the builders of delayed payments from the buyer's side. It gives the builder all the rights to cancel the booking of the said house in case the buyer continuously defaults on his/her payments.
2. The act allows the builder to delay in the delivery of the project but only under certain conditions – such as natural calamity. Here, the developer must submit the reasons for the delay.
3. The act has increased the demand for housing due to the safety net provided for the buyer. This has led to the sale of unsold units of a project, which has helped many developers to recover their costs.
How can you ensure that a property is RERA compliant?
Since the ushering of the RERA era, the consumer now has the power tool of ''Right to Information'' as the builder/developer is obligated to enter the details on the states RERA website related to their respective project. A buyer can now easily access information related to the project by noting down the RERA number given in the advertisements. However, this is valid only for those projects where the number of units is eight or more, and on a unit size of at least 500 square meters.
RERA with Karnataka’s perspective:
Every state is mandated to set up a RERA authority and RERA website under their respective states. The Department of Housing, Government of Karnataka is the nodal department for implementing the RERA Act in the state of Karnataka. Until March 2019, there was an establishment of an interim authority only; however, now the Karnataka government has established a regular Karnataka Real Estate Tribunal.
Step-by-step guide to find project details on Karnataka RERA website
•Note the RERA number of the project •Click on services •Go to project status •Enter project name or RERA registration number •Get all the information by clicking on search iconConcerns with RERA since its inception:
1. The implementation of RERA is not uniform across India, this gives mixed signals to investors, especially companies or individuals from abroad. E.g., West Bengal has still not implemented RERA and has, in fact, gone ahead in formulating its own law.
2. The act does not explicitly mention the rights and duties of a real estate agent, even though they play a crucial role in the real estate sector. This is not the same issue being faced by other stakeholders such as developers and buyers.
3. In some states, such as Madhya Pradesh, a judgement by a consumer forum and a RERA authority both stand valid. For a law to function seamlessly, there should never be two authorities delivering judgement. However, this is not the case with all the states.
It has been a little more than 3 years since RERA got established in the country. India has successfully achieved in registering more than 52,000 real estate projects and 40,517 real estate agents across the country. The RERA has certainly impacted the Indian economy in a positive manner by introducing financial discipline, transparency, and accountability in comparison to the pre-RERA times. However, there remain issues that need to be addressed immediately for the smooth functioning of the real estate sector:
1. State RERA laws should be aligned with the centre’s RERA laws. This will bring in uniformity and will help those builders, especially the ones who operate their projects across India.
2. Understaffing in RERA has not led to realizing the benefits of RERA to its fullest potential.
3. A provision of a draft in the sales agreement format would greatly help the builders and buyers.
Although penalization has brought fear in the mindset of builders, it has helped to maintain discipline in the real estate sector in terms of – delivery date of the project, project specifications, and transparency. RERA has streamlined the process in several states and has promoted the growth of volume of sales and value factors. RERA is indeed the step in the right direction towards a transparent and profitable venture for all stakeholders.
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