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.

Realty Plus - - Table of Content -

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

De­vel­op­ers’ views

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.

year-end ASSESS­MENT

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.

ng Khai­tan

Dr. sa­man­tak Das

shishir Bai­jal

tushad Dubash

Deepak go­ra­dia

ni­ran­jan hi­ranan­dani

source: Knight frank

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