Builders are worried about the 31 July deadline to sign up on the Real Estate Regulatory Authority’s website. Under the new law, developers and real estate agents who don’t comply can be jailed or penalised by up to 10 percent of the project value.
There are still a lot of questions on the implementation of the new Act. Let’s try and answer a few.
How is the implementation of The Real Estate (Regulation and Development) Act, 2016 (RERA) coming along?
While RERA came into play on 1 May 2017, the last date for the registration of “ongoing” projects is 31 July 2017. More than 23 states and union territories have notified their rules, set up interim authorities, very few have launched the government websites and some of them have even appointed interim tribunals.
However, due to the alleged dilution of rules by certain states, states such as Haryana and Uttar Pradesh have had to revisit their already notified rules. Dilution of rules does remain a primary concern for RERA’s successful implementation and it is imperative that registration of both new and ongoing projects as well as real estate agents be strictly monitored to prevent any further delays.
What are the immediate challenges for the implementation of RERA?
Mr Venkaiah Naidu did a stellar job – pushing for the implementation of the law and with his exit from the Ministry of Housing (and Urban Poverty Alleviation). It is crucial that his successors continue to pursue such implementation with the same vigour.
I also feel that the plethora of approvals and sanctions required from the regulatory perspective need to be simplified to empower the developer to deliver on projects in time. In certain areas there may be teething and implementation issues, and it is crucial for the Government to provide clarity on these in a timely manner.
Why is the dilution of RERA rules in Haryana and Uttar Pradesh causing so much concern?
The chief cause for concern arises from what is considered to be dilution of the provisions of RERA. RERA is simply framed around the completion certificate, which is a definitive certificate of approval stating that a real estate project has been lawfully constructed as per the approved sanctioned plans meeting all regulatory requirements.
As per the provisions of RERA, if a project does not have a completion certificate, aggrieved allottee’s of such a project may approach the real estate authority of the state or appeal to the state appellate tribunal (under RERA) to enforce the terms of the builder-buyer agreement which would ensure that these pending issues would be legally addressed.
The issue being highlighted is that various states have limited the liability of developers of existing real estate projects by narrowing the scope of what projects would fall within the ambit of RERA, thereby circumventing the trigger of the completion certificate.
For instance, UP introduced the definition of ongoing projects to mean a project where development is going on but has not been issued a completion certificate. At the same time, such an ongoing project excludes the following types of projects:
- Where services had been handed over to the local authority for maintenance
- Where common areas and facilities had been handed over to the RWA
- Where development works were completed and deeds have been executed for seventy percent of the units
- Where development has been completed and completion certificate had been merely applied for.
By insertion of this definition, a majority of the projects have been left out of the jurisdiction of RERA because existing real estate projects may fulfil one or more of the aforementioned criteria.
Occupation certificates or part-completion certificates are merely certificates which state that a particular phase of a project has been completed and is fit for dwelling.
A completion certificate is the final and definitive approval to ensure that the project is completed properly. By relying on Occupation Certificates, these states have relaxed the requirements for the builders.
When UP notified these rules, it created a massive stir with thousands of aggrieved property buyers in the Noida-Greater Noida region appealing to the newly appointed Chief Minister, who assured them that he would re-visit these rules to ensure that there was no dilution. As on date, the UP rules are still awaiting finalisation.
Similarly, Haryana has been accused of dilution its rules under RERA.
How will RERA change the real estate market?
I am of the firm view that the successful implementation of RERA will transform the real estate market to make it more structured, transparent, efficient and professional.
Developers will have an increasingly administrative role in real estate projects ensuring that the various verticals of project development including financing, construction, supply chain management, regulatory compliances etc are in order, and that projects are being finished in a structured manner as per the specifications and timelines promised to customers.
Customers will benefit for obvious reasons – they will receive exactly what they paid for and will have the comfort that there shall no longer be delays or unexpected changes in projects that they have invested their hard -earned money in. The separate bank account mechanism mandated under RERA will ensure that the funds being paid by the allottees are not being misused.
Real estate agents will be regulated and consistently monitored. In the long term I feel that RERA will ensure that fly-by-night or fraudulent operators will opt out of the real estate game and serious players who have a long term view will be able to succeed.
RERA has been amended to impose imprisonment in cases of default by homebuyers. Is this fair?
Penalties under RERA have been dealt with in detail and the law provides, very clearly, that the question of imprisonment, whether for promoters, agents or allottees, will arise only in cases of continued default.
In cases of continued non-compliance or contravention of the orders or directions of first, the state authority and then the state appellate tribunal imprisonment may be imposed.
If RERA is to be successful in the long run and developers are expected to complete projects in a structured manner keeping timelines in mind, then then the home-buyer too has to be bound by certain obligations and the buyer will be contractually agreeing to his obligations under the terms and conditions of the builder-buyer agreement.
And what about provisions for imprisonment imposed for real estate agents?
RERA aims to provide structure and transparency to the real estate market by enforcing the contractual obligations between all the parties in a real estate transaction.
Therefore, everyone involved in a transaction needs to be regulated. Real estate agents play an important role in a real estate transaction and I don’t see why they shouldn’t be regulated.
State-wise registration and imposing responsibility on the agent not to advertise or solicit incorrect information for saleable properties is vital for regulation of the market. In fact, the Government has taken an inclusive and progressive view to recognise websites, electronic messaging, SMS etc as advertising under RERA.
This will protect millions of home-buyers from all the fraudulent advertising of projects which has been taking place across India.
Will RERA be a success?
RERA will slowly but surely change the way the real estate market develops in India. It will definitely be more consumer-centric. But I honestly don’t see any of this happening overnight.
Just to get the law passed and implemented at the ground level has taken years and I think it will be a few more before we can safely gauge how effective RERA really is.
What is really surprising is the amount of activism by citizens across the country – appealing to the state governments to implement the law. In the first day of UP’s RERA website being launched, it has received more than 15,000 complaints in spite of having a registration fee of Rs 1000.
It seems like RERA really is the glimmer of hope that the thousands of aggrieved home-buyers were waiting for. For several years Indians have highlighted the need for regulation of the real estate sector, now we must wait patiently and have faith in RERA.
(Yudhist Narain Singh is a real estate lawyer based in New Delhi.)
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