RERA Efficacy in India

Mon, 08/01/2022 - 12:27

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From cracking down on misrepresentation and false promises to implementing penal provisions for consumer redressals, RERA, the Real Estate Regulatory Authority established under the Real Estate (Regulation & Development Act), 2016, has undoubtedly brought a paradigm shift in functioning of the real estate sector. It has made the real estate sector, particularly the residential segment more organized, transparent, secure and fair by creating an umbrella authority for safeguarding homebuyer interests. In addition, it has also supported a homebuyer’s right to a refund in case of inexcusable delays along with compensation benefits in cases of inordinate delays. In recent times, the regulatory body has also played a more active role as a mediator, bringing resolutions for scores of homebuyers and developers with stalled projects, to ensure that a solution which allows for the homes to be delivered is more long-term than just imposition of penalties.

The efficacy of any regulation lies in its implementation in the true spirit of the legislation. RERA was a central act, but its implementation was left to the individual states, with many deciding to Enforce it in letter and spirit while others diluted and tweaked some key provisions. The biggest has been the definition of “ongoing projects”, where the rule referred to all projects which had not received occupation certificates. Many states chose to dilute this to not include those who had applied for occupation certificates, or which stated their completion dates as within 1 year of RERA enforcement in the said state. Some like West Bengal came up with its own regulatory body - West Bengal Housing Industry Regulatory Authority (WB-HIRA). However, after multiple discussions, the regulatory body was declared unconstitutional by a bench of Supreme Court of India.

While the dilution of the law and some key provisions has brought into question the efficacy of RERA, the absence of single window clearance also obstructed its successful implementation in the states. It is perceived that, despite knowing the fact, RERA overlooked the primary problems of developers concerning multiple approvals, permissions, and NOCs required for initiating and marketing the projects that afflict them, making it a tedious process to complete the project. A single window clearance system is seen as a way to expedite the entire process, reducing unnecessary delays and construction costs. Uttar Pradesh is the only state which has taken a commendable step by introducing a single-window clearance system. Other states are likely to follow suit in the future. Not covering statutory approval bodies under RERA also does not solve the problem of delays faced by developers. Imperfect implementation of disclosure norms, variation in project level data across states and inconsistent data updation have been a few afflictions that continue to plague RERA, but it remains in no doubt that market transparency has improved, and a lot of information asymmetries have been removed for potential buyers. While the implementation may not be perfect, some states like Maharashtra have created a template for all to realise that the regulation can evolve and truly embody the spirit with which it was conceived.

According to the latest Ministry of Housing and Urban Affairs data, RERA has set a benchmark by disposing of 97,404 complaints and registering 87,124 new projects and 65,500 real estate agents. It is by no means perfect but has been a major shot in the arm for a more transparent residential segment while providing appropriate safeguard provisions for homebuyers which has supported the market momentum as buyers could approach the market with greater certainty and confidence for executing their purchase decisions.

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