Since the introduction of Real Estate Regulatory Authority Act 2016, the Indian realty sector has become more transparent and has helped buyers and sellers to build the trust the real estate sector stakeholders needed for transactions.
This year Real Estate Regulatory Authority Act 2016 (RERA) turns six. Introducing the RERA was an effort to promote the real estate sector as well as to establish an adjudicating mechanism to resolve disputes arising around real estate projects.
According to Ministry of Housing and Urban Affairs the Real Estate (Regulation and Development) Act (RERA) has been fully notified in 30 states where 80,492 Real Estate Projects and 62,550 Real Estate Agents have registered under RERA across the country.
RERA has three main functions. The first is regulatory oversight, which involves project registration and monitoring whether or not they are progressing in the right direction. The second is developer-homebuyer conflict settlement. Third, there's general housing policy, such as what may be done to improve housing infrastructure.
Many states, including Maharashtra, Rajasthan, Uttar Pradesh, and Haryana successfully implemented RERA rules and regulations to improve the real estate market. RERA registration is required in several states for projects larger than 500 square metres.
Prior to RERA, projects were delayed due to the diversion of monies acquired from one project to another. However, promoters must now reserve 70% of all project receivables in a separate escrow account. The money in such an account can only be used for construction costs, and it must be certified by a professional.
Since promoters would be required to make periodic submissions to the regulatory regarding the progress of the project, home buyers will be able to track its progress on the RERA website. RERA also established a common model sale agreement between promoters and homebuyers. RERA also acts as a middleman between buyers and sellers. It also serves as a body to punish developers for bad practices, which was previously a time-consuming process.
RERA has helped enhance sales for builders while also guaranteeing that the rights of buyers are protected at all times. On issues such as real estate project advertising, project completion, and cancellation charges for cancelling a booking, the RERA tribunals have acted in the best interests of buyers.
RERA has boosted the efficiency not just for buyers but also for developers. While, developers are frequently penalized for delaying construction, but now buyers are also penalized for late instalments. RERA also allows for the extension of real estate project registration, however registration must be completed within a year, along with the application and price.
During the Covid Pandemic, RERA granted extensions of six to eight months to builders to complete their projects, which was the need of the time.
RERA ACTIONS & REACTIONS
The Uttar Pradesh RERA fined nine promoters Rs 1.40 crore for failing to comply with its instructions, despite the Authority giving them ample time to do so. Developers that advertised without registering with UP RERA were also punished. In one of its rulings dated January 4, 2022, the UP-Rera approved Urbanac Building Technologies to purchase a land from Proplarity Infratech Pvt Ltd that covered 20,000 square metres (five acres). For the first time, UP RERA permitted for the transfer of rights between enterprises for the execution of Bizlife project
Maharashtra RERA blacklisted 644 residential projects in the state, prohibiting their sale. MahaRERA also allowed a buyer to withdraw from the project owing to incorrect information on the brochure, and the developer was ordered to reimburse the money with interest. In another case, MahaRera fined a developer Rs 1000 per day for failing to register the project, with the fee to be paid daily to the regulatory authorities until the project receives a registration number.
The MahaRERA Appellate Tribunal has ruled that if the redevelopment contract has expired, buyers can request a return from the first builder. In a decision that explains the function of a housing society in redevelopment projects, Maha-RERA determined that societies must provide explanations when switching builders in the middle of a project and must also honour allotments made by the previous builder to buyers of the project's free sale component..
Gurgaon developers were fined Rs 3 crore by Haryana RERA for advertising without registering. HaRERA has also instructed builders to only sell flats on carpet area. HaRERA also set a limit on the commission that brokers can charge while arranging a land transaction. Banks cannot auction projects without the approval of purchasers and authority, according to HaRERA. HaRERA will issue thorough recommendations on the handover of projects to Resident's Welfare Associations (RWAs), the development of RWAs, and the duties of builders in the near future.
Punjab RERA had written to the Greater Mohali Area Development Authority (GMADA) to take corrective measures for protecting the rights of people who had invested in properties auctioned by it for setting up group housing societies and other commercial projects after one real estate group defrauded customers.
Real estate entrepreneurs who do not register their projects with Kerala RERA face a penalty of roughly one crore rupees. Kerala RERA has fined a luxury construction company for failing to follow the rules and delaying a project in the state.
In a recent writ petition, a division bench of the Hon'ble Rajasthan High Court ("Rajasthan HC") issued a landmark judgment protecting the rights and interests of homebuyers, holding that secured creditors such as financial institutions and banks fall under the jurisdiction of the concerned RERA and that homebuyers can approach the concerned RERA against such secured creditors.
What's more, UP RERA has created a micro-website to assist promoters in resolving their issues. On the MahaRera website, homebuyers can look up data of complaints against projects and promoters. HaRERA and Jupitice Justice Technologies have agreed to collaborate on the digitalization of the complaint redress system.
DISSATISFACTION AMONG HOMEBUYERS
Many homebuyers across the country feel let down by the RERA implementation mainly due to execution delays despite favorable orders by the regulator and the critical gaps like lack of manpower and power to district magistrates for recovering
the penalties from defaulting developers.
Homebuyers and their associations have been raising concerns over non-enforcement of these orders. “Despite the orders getting served, homebuyers are left in the lurch as the enforcement of these orders is taking unreasonable time,” said Abhay Upadhyay, President, Forum for People’s Collective Efforts (FPCE).
Homebuyers forum have demanded that the government convene a meeting of the Central Advisory Council (CAC), the apex advisory body under RERA for timely, effective, and coordinated implementation of the legislation of RERA.
A general sentiment among people is that RERA has failed to meet the expectations of scores of homebuyers whose investments were stuck in ongoing housing projects. Another point of contention has been the blanket extensions given by RERA during pandemic even when there was no work stoppage nor complete lockdown announced.
Industry experts too have expressed concern on many states having diluted the RERA provisions allowing developers to flout the rules. It has been suggested that general rules of all states should be reviewed and placed before the Supreme Court for its consideration.
The issue of structural safety of projects too has been a major cause of distress to homebuyers which again is not completely covered under RERA though builders are required to give 5-year warranty against structural flaws as per RERA
WHAT MORE CAN BE DONE
One of the recommendations has been that RERA should be revised to hold financial institutions responsible for the completion of projects that they have financed. Because financial firms own unsold flats, RERA should have authority over them. RERA currently only covers two groups of people: buyers and real estate developers.
Some state RERA authorities continue to violate Section 34 (c) of the RERA Act, which requires them to keep a database of defaulters on their website, including images of the promoters, for public inspection. RERA should try to close loopholes used by promoters to get away, there should be regular inspections
Developers advocate single-window disbursal to make it easier for them to obtain approvals. Since one of the biggest roadblocks has been clearance from government officials, the projects get delayed.
A uniform payment schedule for home buyers across states is also urgently required. There is a need for a clear definition of "structural defects," and after collective consultations, the state and central governments should provide more clarity on the subject.
Experts are of the view that states should not be allowed to weaken the RERA Act's provisions, which are critical to its effectiveness. RERA has achieved excellent progress over the years, but continued efforts are required to ensure RERA’s continuous improvement.the penalties from defaulting developers.
Homebuyers and their associations have been raising concerns over non-enforcement of these orders. “Despite the orders getting served, homebuyers are left in the lurch as the enforcement of these orders is taking unreasonable time,” said Abhay Upadhyay, President, Forum for People’s Collective Efforts (FPCE).
Homebuyers forum have demanded that the government convene a meeting of the Central Advisory Council (CAC), the apex advisory body under RERA for timely, effective, and coordinated implementation of the legislation of RERA.
A general sentiment among people is that RERA has failed to meet the expectations of scores of homebuyers whose investments were stuck in ongoing housing projects. Another point of contention has been the blanket extensions given by RERA during pandemic even when there was no work stoppage nor complete lockdown announced.
Industry experts too have expressed concern on many states having diluted the RERA provisions allowing developers to flout the rules. It has been suggested that general rules of all states should be reviewed and placed before the Supreme Court for its consideration.
The issue of structural safety of projects too has been a major cause of distress to homebuyers which again is not completely covered under RERA though builders are required to give 5-year warranty against structural flaws as per RERA
WHAT MORE CAN BE DONE
One of the recommendations has been that RERA should be revised to hold financial institutions responsible for the completion of projects that they have financed. Because financial firms own unsold flats, RERA should have authority over them. RERA currently only covers two groups of people: buyers and real estate developers.
Some state RERA authorities continue to violate Section 34 (c) of the RERA Act, which requires them to keep a database of defaulters on their website, including images of the promoters, for public inspection. RERA should try to close loopholes used by promoters to get away, there should be regular inspections
Developers advocate single-window disbursal to make it easier for them to obtain approvals. Since one of the biggest roadblocks has been clearance from government officials, the projects get delayed.
A uniform payment schedule for home buyers across states is also urgently required. There is a need for a clear definition of "structural defects," and after collective consultations, the state and central governments should provide more clarity on the subject.
Experts are of the view that states should not be allowed to weaken the RERA Act's provisions, which are critical to its effectiveness. RERA has achieved excellent progress over the years, but continued efforts are required to ensure RERA’s continuous improvement.
SUPREME COURT VIEW
The Apex Court has asked the Chief Secretaries of all the States to respond to the queries raised by the Centre on implementation of RERA Act, 2016 rules in their jurisdiction.
In March 2022 the Centre had written to all the States seeking certain information with regard to the agreement of sales rules notified under the RERA Act and their compliance but only five States had responded to it.
The top court noted that the central government shared the draft 'agreement for sale' in 2016 after the enactment of RERA with all the states and Union Territories and currently West Bengal, Jammu and Kashmir, and some north-eastern states are yet to notify the rules.
The top court had said that there may be some local conditions that need to be taken care of by the states but most of the rules should be in compliance with the Centre’s draft rules of 2016.
The top court had said that it wants that instead of leaving it to the States, the Centre makes the model builder-buyer agreement and model agent-buyer agreement which shall be applicable for the whole of the country. It had said that the whole purpose is that there is some uniformity in the basic terms and conditions and the flat buyers are not exploited.
The Centre in its affidavit said, “There is a robust regulatory mechanism, and a draft 'agreement for sale has already been prescribed under the provisions of RERA (Real Estate Regulatory Authority), which seeks to balance the rights and interest of home buyers and promoters in an accountable and transparent manner''.
According to section 84 of RERA, the appropriate government that is the state government save in the instances involving its application in the territory of union territories has to notify rules for carrying out the provisions of this Act. RERA mandates for registration of projects before advertising, marketing, booking, selling and the law ensures the timely delivery of real estate projects, and the entire fund flow is also subject to strict monitoring by the regulator to avoid diversion of funds, which will also secure the interest of home buyers.
The top court had said it was important for the country to have a model builder-buyer agreement in the real estate sector for consumer protection because developers try to put numerous clauses in it, which common people may not be aware of.
