State of ‘Real Estate (Regulation and Development) Act, 2016’

Real Estate refers to property consisting of houses and land. It is considered to be a major asset in India. This sector has been suffering from malicious practices, asymmetric information, and feudalistic supremacy. What made the condition worse was the lack of regulatory framework. It has been observed that, various developers have failed to complete their projects on time or they have been found unable to deliver on to their commitments, seriously denting the confidence of potential buyers. Cases used to stretch for years which made the buyers suffer both mentally and economically.

Real Estate (Regulation and Development) Act, 2016 paved way for Real Estate Regulatory Authority (RERA) which established framework to hold the real estate developers accountable for any breach of contract with the buyers. It will regulate the real estate sector and will also function as an adjudicating body for speedy redressal of any disputes that may arise. Real Estate (Regulation and Development) Act, 2016 will:

• Safeguard the interests of home-buyers,
• Increase the transparency in the sector,
• Increase investments in the real sector by boosting investors’ confidence.

Provisions under the Real Estate (Regulation and Development) Act, 2016

Under its provisions, the states will have to establish RERA as a special body to regulate the real estate sector. The other provisions include:

• Compulsory registration of new and on-going projects
  • Developers also have to get all sanction plans approved before sale and regulatory clearances in place.
  • Once the project is registered, the developer has to publish all the relevant details like the date of launch, permission secured, delivery date, facilities, etc. online on the website of RERA. Once the time limit declared by the developer is over, the registration of the project will be revoked.
  • Failure to register of projects is a serious offence. In case of any non-compliance, RERA has the power to order up to three years imprisonment for the developers. However, the developer doesn’t have to register if the area of land under the development is less than 500 m² or the no. of apartments is less than 8.
• Protection of Buyers
  • The buyers or investors have the right to withdraw from the project, if it is not delivered on time.
  • The developer is supposed to compensate the buyers with interest, when they withdraw from the project at this time. This does not require filing of a complaint.
  • The developers will be held accountable for structural defects for a period of 5 years.
• Functions of RERA
  • If the developer neglects to compensate the buyers then they have the right to file a complaint with the regulating authority. The authority will appoint an officer who will conduct an enquiry into the case and then will pass judgement.
  • If the buyer feels that the officer has given an unsatisfactory judgement then he can file a complaint with the appellate tribunal.

Under the Act, every state and UT is supposed to have setup a regulatory authority and an appellate tribunal for resolving complaints. Apart from the 3 years sentence in prison for developers; the agents and buyers can be imprisoned up to 1 year for violation of orders of Appellate Tribunals and Regulatory Authorities.

Special Provisions:

• Under the Act, the developer is required to deposit 70% of the funds gathered from the buyers into a monitor able account. This account will only be used to cover expenses for the development of the project.
• During the development of the project, the developer cannot alter the specification without the consent of more than 2/3^rds of the buyers.
• The developer is prohibited from accepting an amount more than 10% of the fees, without a formal written agreement.
• The projects which are already registered with RERA are authorised to be bought or sold.

 Evaluation of the Act

Main feature of this Act is the redressal mechanism, which was solely missing from the Indian Real Estate Framework. The buyers will receive complete information about the project, this will reduce the asymmetric information and they will be less prone to cheating. And in case of any issue, the buyers will be appropriately compensated. The only disadvantage this may have is the probability of the developing costs rising up.

Another issue which is raised by the developers is that the Act is not clear about the force majeure, like an earthquake. What happens if an earthquake or flood destroys the project?

This Act is not supposed to discourage the developers. They are an important factor in the growth in the country. They provide jobs on a large scale and the real estate sector contributes approximately 6% in the country’s GDP. Keeping this in mind, the Act seeks to assist the developers by providing the regulatory authority (RERA) with powers to make recommendations to State governments, which will create a single window clearance for a timely approval.

Since land is a State subject under the Constitution of India, state governments are required to ratify the Act. It gives a lot of discretion to the states and this makes the Act somewhat weaker.

Issue with States

The centre should take a firm hand in dealing with those states who have not implemented RERA as yet. These include Assam, Bihar, Chhattisgarh, Manipur, Meghalaya, Mizoram, Nagaland, Delhi, Orissa, Sikkim, Tripura, Uttarakhand and West Bengal. These states (or the National Capital) might be guided by vested interests or may be hesitating to establish due to logistical reasons. Centre should assist them if they need assistance in any way, because streamlined and smooth implementation of the Act all over India is required for effective implementation.

Some states have deliberately diluted the RERA rules led prominently by Uttar Pradesh and Maharashtra. Later this attitude was seen in RERA establishment in Haryana, Karnataka, Tamil Nadu, Punjab, Telangana, etc.

West Bengal rather than properly implementing RERA has enacted its own state legislation by the name of West Bengal Housing Industry Regulation Act, 2017 (WBHIRA). This legislation is just a mockery of RERA and terribly dilutes the provisions of RERA.

Impact of RERA 

Real estate sector is undergoing changes at a slow but steady pace and these changes are definitely for the better. Developers have become increasingly more transparent and are also found to be more considerate towards dispute resolution at the very initial stages of a confrontation with the buyers for fear of being taken to RERA. Time for the delivery of justice has been reduced very significantly. Even the appeals made to RERA tribunal are resolved within 12 months period.

Conclusion

However, even the critics of the Act agree that, it is a milestone in the Real Estate Sector. Single window clearance will go a long way in helping the developers for approval of projects. Most importantly, RERA will ease the burden on home buyers who put their hard earned money into a real estate investment.