The legislation has brought order, but more needs to be done
The Real Estate Regulation and Development Act (RERA), 2016, was introduced to protect the interests of homebuyers and to boost investments in the realty sector. Although the Act came into effect from May 1, 2017, more than a year later, it remains a non-starter in many states across India. Few states have notified the Act; in most states, the legal architecture of RERA has not been put in place. At the time of inception, RERA was supposed to clean up the mess of the realty sector, incentivise honest builders and provide grievance redressal mechanism to consumers. However, the picture is not as rosy today as it was imagined earlier.
There are always two sides of a coin. Likewise, there are many good and some bad aspects about the implementation of RERA. For instance, there is no official authority to oversee the execution of the guidelines of the Act. A developer who is seeking prior approval for a project does not have clarity about whom to approach for any enquiries. This has a negative impact on the profit margins of developers.
One major concern has been the failure of states meeting the scheduled timelines to draft rules in line with the Central norms. It is unfortunate to note that only three states – Maharashtra, Madhya Pradesh, and Punjab – have implemented full-time regulators under RERA. Moreover, even the states that notified RERA are already diluting norms to protect the developer community. Buyers have been concerned about the dilution of the notified rules.
Still, RERA has changed the tone for the regulation of the real estate sector. The number of new project launches has come down considerably because there is pressure on builders now to be transparent about the use of money. Evidence suggests that consumers have become more aware of their rights and builders have become more cautious in their duties towards the consumer. The rising number of complaints being registered with the respective state authorities indicates that consumers are gradually bestowing their faith in RERA regulators and coming forward to register their complaints. Anecdotal evidence suggests that the sector is witnessing consolidation, which means that smaller real estate players are finding it tough to comply with the new rules. According to Magicbricks’ consumer survey, more than half of home buyers prefer to file their complaints against builders with real estate regulators established under the RERA Act.
When we speak about the issues being faced in this sector after RERA was enacted, we should look at the positive changes that RERA has brought. It would be wrong to say that RERA has not been good for the sector. RERA to work its magic should take another year or so. It is still new, so, we are going to face these initial hiccups.
Implementation of RERA has increased investments by NRIs in Indian real estate. The real estate market has become lucrative for them especially after implementation of reforms like RERA and GST. NRIs now have more confidence to buy homes in India. In addition, commercial hubs are registering great demand, be it Gurugram, Pune or Bengaluru. NRIs are actively seeking for locations with commercial potential, which are profitable from an investment point of view.
RERA benefits both homebuyers and builders. It would not be wrong to say that the legislation has revived confidence among home buyers which only spells good news for builders and developers. RERA is playing an integral role in creating and maintaining a harmonious relationship between builders, agents, and buyers. The rules mentioned under this Act ensure that buyers are protected from unscrupulous builders or agents. Under the Act, builders have to quote prices taking into consideration only the carpet area, not super built-up area. The carpet area has been clearly defined in the RERA act to include usable spaces like kitchen and toilets. Similarly, the subvention scheme has been witnessing a boost, especially after the implementation of RERA. This Act is undoubtedly contributing to win back the confidence of homebuyers. It can fully achieve its mandate if it is implemented fully in all jurisdictions.
About the Author:
Avneesh Sood is Director at Eros Group.