Mumbai, India, 5 April 2017/E Jayashree Kurup/– At least 60 per cent of buyers polled by Magicbricks recently indicated that they intend to buy a house within the next six months. However, most buyers said they would wait for the Real Estate Regulatory Act (RERA) to kick in before they made the purchase. If there was any one regulation that property buyers expect will protect them, it is RERA. While home-buyers await the protection under the law, developers are now agreeing with the provisions of RERA and making changes in business practices to conform with RERA.
Defining RERA
The RERA document states that “no promoter shall advertise, market, book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment or building, as the case may be, in any real estate project or part of it, in any planning area, without registering the real estate project with the Real Estate Regulatory Authority established under this Act.” This means that projects to be sold, have to be approved and given the due clearances by authorities.
In an exclusive digital interview with Magicbricks, M Venkaiah Naidu, Minister for Housing & Urban Poverty Alleviation (HUPA) said that the government is committed to bring down the approvals timelines to below 60 days. This will soon become a reality in Delhi and Mumbai and other cities are to follow suit soon. With faster approvals, the biggest issue of delays in delivery of projects gets addressed. Firstly, no developer is allowed to sell the project without requisite approvals and soon no authority can delay the building process as after 60 days work can start on the project with deemed approvals, once the entire process is in place.
To further speed up the approvals process, the minister said he was in constant touch with other ministries such as environment, civil aviation, archaeology, transport etc to create blanket approvals for corridors in city masterplans, so that each individual project does not need to seek clearances from every ministry.
Unlike earlier, RERA is an Act that would function best in the spirit of cooperative federalism. The Central ministry has drafted model guidelines but since land and property is a state subject, the states have been given the freedom to modify or change the Central law to suit local needs. Finally there is provision for even district RERA committees.
The idea is to spare the consumer the hassle of battling large developer organisations in the legal system that takes time, effort and money. Ensuring timely approvals, completions and even adherence to promised specifications is one of the prime responsibilities of this Act. Punitive measures have been provided against unscrupulous developers.
Minister Naidu said he was confident that by the deadline of May 2017, all the states will follow suit and notify the rules. “Some states have notified the rules under RERA and some are yet to do so. I am sure the states will make the final rules in the spirit of the legislation passed by the government.” The minister warned states that if they drag their heels on compliance with such a key Act they will have to face the wrath of consumers. Speaking to Magicbricks, the minister said the strength of a mature democracy like India is its “enlightened public opinion.”
So what about states watering down the provisions of the Act? Maharashtra was one of the first states to appoint a regulator for RERA in the state. Gautam Chatterji, former Indian Administration Service (IAS) officer, currently working as officer on special duty (OSD) for chief minister Devendra Fadanvis, was appointed the regulator.
However, the state RERA had significantly diluted many provisions of RERA. For instance a developer could terminate a flat allotment by citing in an email, the default by the buyer, within seven days. But the developer could refund the money in six months without any penalty whatsoever. This violated the Central draft that had mandated return of the money within 45 days and there was no provision about the seven day default provision. Also the earlier law did not allow the developer to sell off the flat till the entire money was refunded. The new Maharashtra law did not restrain the developer in any way.
The state draft also proposed that a buyer must pay 30% of the total cost while signing the agreement and 45% when the plinth of the building is constructed. The earlier state law stipulated 20% payment when the agreement is signed with the developer. The Centre’s rules do not stipulate any payment schedule; it left it to the states to formulate it.
Central rules proposed a fee of Rs 1,000 for filing complaints before housing authority; the state draft has proposed to hike this fee to Rs 10,000.
The Central rule requires a builder to submit an annual report including profit and loss account, balance sheet, cash flow statement, directors report and auditors report for the preceding three financial years, among other things. However, the Maharashtra draft rule is silent on such a requirement.
Now, the Maharashtra government is planning to amend the draft rules in order to make them more consumer-friendly. The changes are based on more than 500 suggestions it received on the draft rules from individuals and consumer rights groups. With RERA coming under the spotlight and the discussions around it getting hot, it is a given that the rights of consumers will be addressed and the housing sector will get back the trust it had lost.
Will the inevitable implementation of the RERA ease the on-ground stalemate where consumers are holding back from purchasing property and developers are caught in a cash flow crunch?
The argument made about clearances by developers has been addressed in the initial pages of the RERA document, where it is said that no promoter shall advertise, market, book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment or building, as the case may be, in any real estate project or part of it, in any planning area, without registering the real estate project with the Real Estate Regulatory Authority established under this Act.”
He further goes on to say, “It’s a known fact that RERA is a good tool, which is not one-sided and is in fact, meant for civil remedies and not criminal. Over the years, investors have brought about speculation and have manipulated the market. RERA prevents the market from getting manipulated as well.”
As per the guidelines and FAQs issued by HUPA, let us understand how RERA functions and at what stage it is currently.
What is the status of the Act?
The Real Estate Bill was passed by the Rajya Sabha on 10th March, 2016 and the Lok Sabha on 15th March, 2016. The Bill as passed by the Parliament was assented to by the Hon’ble President on 25th March, 2016. The Act as assented to by the President was published in the Official Gazette on 26th March, 2016 for public information.
When did the Act come into force?
Section 2, sections 20 to 39, sections 41 to 58, sections 71 to 78 and sections 81 to 92 were notified by the Central Government to come into effect from 1st May, 2016.
Why have some sections of the Act not been notified yet?
Some sections of the Act have not been notified yet, as the institutional structures, namely the establishment of the Regulatory Authority and the Appellate Tribunal are necessary prior to their enforcement. For e.g. projects can only be sold after they are registered with the Authority, thus, in the absence of the same there would be a vacuum.
When would the remaining sections of the Act come into force?
Sections 20 and section 43 provides that the Authority and the Appellate Tribunal need to be established within 1 year of the commencement of the Act. As the said sections were notified for commencement on 1st May, 2016 the Authority and the Appellate Tribunal are required to be established maximum by 30th April, 2017. Sections of the Act which have not been notified yet, would be notified maximum upon the expiry of that period.
What was the need for a regulatory law for the real estate sector?
The real estate sector has grown in the recent years but has largely been unregulated from the perspective of consumer protection. Though, consumer protection laws are available, the recourse available therein are only curative, but not preventive. This has affected the overall potential growth of the sector due to absence of professionalism and standardization.
What are the objects and reasons for which the Act has been framed?
The Real Estate Act is intended to achieve the following objectives:
- Ensure accountability towards allottees and protect their interest;
- Infuse transparency, ensure fair-play and reduce frauds & delays;
- Introduce professionalism and pan India standardization;
- Establish symmetry of information between the promoter and allottee;
- Imposing certain responsibilities on both promoter and allottees;
- Establish regulatory oversight mechanism to enforce contracts; 2
- Establish fast- track dispute resolution mechanism;
- Promote good governance in the sector which in turn would create investor confidence.
Article: E Jayashree Kurup & Neha Nagpal with inputs from ET Realty
States to notify RERA by May 1
