One Year of RERA – A Recap
RERA, one of the most important policy initiatives for real estate, completed its one year this May. Realty Plus summarizes the industry sentiments on its disappointments and achievements.
On 1st May, 2016, the Real Estate (Regulation and Development) Act came into force after a lot of deliberation and amendments by the Union government. The objective of the Act is protection of interest of the property buyers and promoting transparency and accountability in the real estate sector. No doubt the sector needed a regulatory body and RERA filled that gap. It provides rationale provisions and compliance processes for all the stake holders, that are part and parcel of a project. The biggest success of RERA lies in its reviving of buyer’s confidence. Being a new law, teething problems remain but more or less the Act has been able to generate positive reaction from both the developers and customers.
If properly administered, RERA can be an immensely effective tool to take on and eliminate all the maladies the real estate sector suffers from. The new law has provided for all the powers and authorities that are necessary in this regard. It is now up to the administrator of the law to apply the same in letter and spirit. It is a continuous process and so only in the long run, we may be able to understand the true effect the new law has over the sector. N G Khaitan, Partner Khaitan & Co., Kolkata clarified the preamble to the RERA. According to him, it unequivocally states, that the law is to protect the interest of consumers in the real estate sector. Any dilution which undermines the interests of consumers will surely fall foul of the very basis of the new law. The prime consideration behind enactment of RERA was to stop the exploitation of the gullible buyers. The rule making authority, must not forget, that the new law is primarily consumer-centric and has been enacted to eradicate all the mischiefs the consumers have been suffering from all these years. Any dilution of the law is certainly the last thing the consumers would like. The chances of the consumers questioning the legality and validity of the dilutions are very high. It is a salutary principle of law, that rules cannot travel beyond the four corners of the parent act. In case these dilutions are found to be extraneous to the parent act, then these will certainly get struck down by the appropriate court. He added, “Delay in implementing the law is certainly a cause of concern. The same law is applicable throughout India (except J&K), but the consumers of certain States are yet to reap the benefits of the law only due to the lackadaisical attitude of the States concerned. Delayed implementation of the law will only help the unscrupulous developers to remain out of the clutches of the law, as the law does not apply to completed projects. The consumers will lose the most since they then cannot have the benefits of getting compensated by the developers for any defects (workmanship defects or title defects) as ensured under RERA. The non-uniformity in the rules, is mainly with respect to the ongoing projects and withdrawal of money from the separate account. Such non-uniformity might appear not to have any inter-state effect, given the localized application of each State rules. However, there may be a chance that the real estate prices in the States having strict rules, might go north due to increase in compliance costs.”
“It is primarily the developers who can bring a project back on track and RERA has played a very pivotal role in this regard. RERA has acted as the level playing field. Given the severe penalties and punishments prescribed for delinquent developers, the intent to bring the projects back on track will now be very high on the part of the developers.” N G Khaitan RERA rules notified in - 20 states and 7 Union Territories. RERA Rules not yet notified in - West Bengal, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura. Fully operational RERA website by - 14 states and 5 Union Territories Projects Registered till date - 27,000 Brokers Registration Application till date 17,000 Forerunner states in RERA implementation - Maharashtra, Madhya Pradesh, Punjab and Gujarat
Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, “The Real Estate (Regulation and Development) Act 2016, that became a reality last year, is a path-breaking law, with immense potential to revive buyer’s confidence and drive momentum in the residential real estate market. States such as Maharashtra, which implemented the regulation in true letter and spirit, witnessed signs of uptick in residential sales and overall consumers’ sentiments. While it has been observed that just over one out of 10 state governments showed the political will and gravity in executing the Central act, we believe that other states would soon follow suit. We have maintained in the past that the resurrection of the Indian real estate rests on the long-term benefits of such structural reforms.” As suggested by real estate veterans, the scope of the newly created Central Advisory Council (CAC) should be broadened to include advisory to state bodies on issues related to RERA functions and creating support infrastructure for speedy implementation. “The actual functions of a RERA regulator are to facilitate the growth and promotion of a transparent and competitive real estate market by making recommendations to the government on measures to encourage investments, creation of a single window approval system, grading of projects as well as promoters and facilitate the digitisation of land records,” said Dr. Samantak Das, Chief Economist & National Director, Research
A tough regulatory body sends all the right signals to the people who are up to mischief. However, it is also true that all defaulting developers cannot be tarred with the same brush and so while meting out punishments the RERA, regulators have been alive to the nature of defaults and the reasons that gave rise to such defaults. Deepak Goradia, Vice Chairman and Managing Director, Dosti Realty concurred, “When any new rule or law is passed initial couple of years comes with problems, but once things settle down then only one can see the real benefit. Same goes with RERA, in past one year RERA has evolved and so have the
permanent regulator. Only half (14 out of 28) the states have a functional portal. 2 UTS are yet to put up this service. And only 10 states and 5 UTS have established Real Estate Appellate Tribunals.” Shishir Baijal “Out of the 28 states, only Maharashtra, Madhya Pradesh, and Punjab have a permanent regulatory authority. Except Dadra and Nagar Haveli and Daman and Diu, other union territories (UTS) are yet to have a “Dispute conciliation between promoters and buyers is only one of the functions. But most states are far away from the whole nine yards. Until the permanent regulators are off the ground, the shift to an organised real estate market would be difficult. If the regulators don’t evolve into institutions with the necessary experience in understanding the ground level challenges faced by participants, they cannot be their eyes and ears to represent their interests.” Dr. Samantak Das
developers and customers. It has helped in bringing the consumer’s confidence back in the market and has streamlined and brought transparency in the real estate operations. Initially there was a lot of hue and cry, but in reality it has helped the market in becoming more transparent and mature. In Maharashtra, RERA has been much clearer and developers have the opportunity to meet RERA officials to understand the processes. Our experience with projects registration was good as we were able to complete the registration process of our on-going projects within 90 days and for new projects within a week’s time. Neel Raheja, President, NAREDCO West and Group President, K Raheja Corp gave his optimistic view of Maha RERA, “I am proud to say that Maharashtra has set benchmarks for other states to take a leaf out of and adopt the rules implemented here. The success of RERA coupled with the recently announced Mumbai Development Plan 2034 will improve sales of the residential projects and instil confidence among homebuyers.” Another developer Tushad Dubash – Director, Duville Estates expressed his confidence in RERA, stating that implementation of policies like RERA and GST last year had a significant effect on the real estate industry and brought about a substantial shift in the market. “RERA implementation as a policy has already ensured that the consumer buying sentiment is finding its way back as is being reflected in sales off take levels of established developers. As a confidence building measure, it is certain that this will have a long standing impact on the sector and lead to positive momentum in the market. Simply put, the act ensures transparency and efficiency in the market and safeguards the rights of the home buyers.”
“At Duville Estates, we were one of the first to have obtained our RERA numbers for our individual product offerings at our 31 acre micro township called Riverdale. It is very pleasing to note that we now have much better informed customers “Redressing of consumer grievances and setting up of RERA not only in the big cities but also in the rural areas will be highly successful and constructive for the industry going forward. It’s commendable to see what all has been achieved in the last one year with RERA.” Neel Raheja The success of RERA, particularly in Maharashtra is evident from the fact that out of around 2600 complaints registered by customers last year, Maha RERA has been able to solve 1900. So in its first year itself, it has proved its merit by effectively solving majority of the issues, keeping in consideration the interest of both the parties.” Deepak Goradia
RERA has indeed identified challenges in its first year of execution and has a long way to go. The need for RERA stems from persistent complains from home buyers over the years, that real estate transactions were biased and mainly in the favour of the real estate developers. RERA, largely endeavoured to create an equitable environment and bring about the fairness of transaction, particularly in the primary market. RERA has made it obligatory for states and union territories to structure their own regulator and outline the rules that will administer the operation of the regulator within their jurisdiction. Commenting on the first anniversary of RERA being notified, Dr. Niranjan Hiranandani, President NAREDCO said “Undoubtedly, RERA is a big step forward for Indian real estate, but it will take some more time for all the states to comply with the norms and create the set-up for its impact, which will bring in consumers protection, transparency and fairness in the real estate sector. For the home buyer, RERA has brought in lucidity and accountability on part of real estate developers, which has boosted confidence and assurance on part of prospective buyers.” Speaking at the Panel Discussion on ‘Housing’ at the MAHA RERA Conciliation Forum organised on the first anniversary of Maha RERA, Vijay Wadhwa, Chairman of the Wadhwa Group pressed for the need for a system where the developer should get all due permissions on time and there should be a regulator to regulate all the Municipal Corporations departments and various other authorities, etc.
In terms of actual functioning, RERA has been a success in few states with a lot of projects registered, but it remains an issue in many other states that have not yet implemented it fully or are yet to appoint full time regulators. Some states do not have a functional RERA website due to lack of necessary supporting infrastructure. It is the effective implementation of the Act that will help achieve the desired objectives. Giving credit where it’s due, the authority is carrying out its effort in an efficient way, and the prospects seem bright. The first year has witnessed working out of issues, tweaking and altering of provisions that will make the Act more resourceful going forward. Even though developers are following the mandate of mentioning their RERA registration number in the advertisements that they feature, not many home buyers can cross check the details at the official portal in states where the websites are not up and running. Maharashtra and Madhya Pradesh were the first states to be ready with the RERA authority and websites. More than 15000 projects are already registered with the Maha RERA. Similarly, in Bengaluru, the live projects are around 1,300 but, the total number of projects registered for the entire state of Karnataka is only 1,500. On the other hand, in Andhra Pradesh, only two projects are registered under RERA. Haryana still does
who appreciate a high level of corporate governance.” Tushad Dubash “I would not go so far as to already coin it as an accomplishment – it is an achievement that is in the creation, something that is a work in progress. We need to see how things work out in the coming months before we can take a call on how to explain it, but at present, I would say the performance of RERA has been encouraging. A lot of work is still to be done in a few states to get the existing and new projects registered” Dr. Niranjan Hiranandani the developers are regulated, we need regulation for the bodies like the RERA or even the Corporation. It will help all the stakeholders.” Vijay Wadhwa “We have a regulator in the form of the RERA; but there is nobody to regulate this body. Similarly, the way
not have a portal and the status of projects registered manually remains unknown. The progress on establishment of a Real Estate Appellate Tribunal is far more disappointing, with only 15 out of the 35 (states and UTS) having made progress on this parameter. Thus, RERA has remained a mixed bag of success and failures given the uneven graph of its implementation, execution and uniformity across the country. It has also resulted in a big reduction in the number of new launches. However, the products now available in market are robust, in sync with customer demand. The established developers have now adopted RERA compliances as regular business work and are in fact also doing joint developments with distressed developers that are struggling to complete their projects. But, the biggest omission of RERA as pointed out by experts is the absolving of statutory authorities. The builders remain at the mercy of state agencies in charge of granting approvals with no recourse, in case the project gets delayed on their pretext.
Knight frank report rera Performance
Real estate is a state subject and the central government formulated Act is a model Act, which is then re-drawn and adopted by the states. Since, 1st May 2016 when the central law came into effect with 60 out of 92 sections, a complete one year time until implementation was available at the disposal of states for establishment of the RERA machinery. Subsequently, the remaining 32 sections came into force on May 1, 2017. Further, 3 months (1st May 2017 to 31st July2017) were provided to promoters for registration of ongoing projects. In the past one year, RERA compliance in some markets has been a prominent factor for price rationalisation in the residential segment as it has put a break on presales activities and fund mobilisation by developers’ at the once popular “soft launch” stage. There have been instances where developers have resorted to selling inventory at a marked discount in a bid to raise finances as no sales at pre-launchstage are allowed now. New supply in the residential segment has also taken a massive hit as RERA compliance and mounting unsold inventory pressures have forced developers to curtail launches. While the Central act permitted states to designate any regulatory authority as the Real Estate Regulatory Authority, it did not define any timeline when such an“interim” Regulator should cease to exist. In addition, since the interim regulators are only “designated” as a Real Estate Authority, it is only an additional responsibility for them to implement the rules and regulations as per RERA. Hence, their efforts fall short of the intended goal of a dedicated real estate regulator. Sadly, most states have been playing the waiting game about getting a Permanent Regulator after handing over the reins to such “Interim” authorities. What was strictly supposed to be a stop gap arrangement has turned into a standard. Such authorities are making half-hearted attempts as evident by progress on even basic parameters like getting the portals up and running, registering projects and agents. Since the Central RERA also stipulates transfer of all applications, complaints or pending cases to Permanent Regulators, the “Interim” regulators seem to let the grass grow under its feet. At present, 25 Indian states are yet to establish Permanent Real Estate Regulators. The following recommendations might salvage the Centre’s vision and help RERA meet its desired objectives: • It is time for Centre to step in and bring out stringent penalties for non-complaint states. • The scope of functions of the newly created Central Advisory Council (CAC) should be broadened to include advisory to state bodies on issues related to RERA compliance.
Dr. samantak Das