Mains Marathon 2024

Approach Briefly introduce the Real Estate (Regulation and Development) Act, 2016 Mention the key provisions of the Act. Identify the impact of RERA on the real estate sector in India. State key issues in the sector Suggest a way forward to improve the regulation of Real Estate sector Conclude suitably

Introduction

The RERA gave India’s real estate sector its first regulator. The Act was passed by the Parliament in 2016, to bring clarity and fair practices that would protect the interests of buyers and also impose penalties on errant builders. Each state and Union Territory will have its own regulator and set of rules to govern the functioning of the regulator.

Body

Key Provisions of RERA

• Security:
  • The RERA act states that at least 70% of the buyer's and investor's money will be deposited in a special account.
  • The remaining 70% will then be allocated to the builders for construction and land-related expenses only.
  • Developers and builders are not allowed to claim more than 10% as an advance payment on the property before the sale contract is signed.
• Disclosure of Ongoing Projects:
  • Developers are required to keep buyers informed about their other ongoing projects.
    • Moreover, they are not allowed to alter the plans without the buyer's permission.
• Fairness:
  • RERA has mandated that developers sell properties on the basis of carpet area rather than high-density area.
  • If the project is delayed, buyers have the right to recover the full amount of their investment, or they can opt for an investment and receive a monthly return on their investment.
• State-Level Regulatory Authorities:
  • The RERA Act makes it mandatory for each state and union territory to form its own regulator and frame the rules to govern the functioning of the regulator.
• Project Registration:
  • Residential real estate projects must be registered with RERA before promoters can market or sell them.
• Consent for Project Transfer:
  • If a promoter wishes to transfer or assign a majority of their rights and responsibilities in a real estate project to a third party, they must obtain the written consent of two-thirds of the allottees and RERA's approval.
• Pre-Registration Restrictions:
  • Developers cannot advertise, sell, offer, market, or book any plot, apartment, house, building, or investment in projects without first registering with the regulatory authority.
• Refund and Compensation:
  • If the promoter defaults on delivery within the agreed deadline, they must return the entire amount invested by the buyer along with the pre-agreed interest rate specified in the contract, based on RERA's model contract.
• Grievance Redressal:
  • If the buyer, the promoter, or the agent has any complaints with respect to the project, they can file a complaint with RERA.
  • If they aren't pleased with RERA's decision, a complaint can also be filed with the Appellate Tribunal.

Impact of RERA on real estate sector in India

• Accountability and Trust : RERA has increased transparency by mandating that developers register their projects with the regulatory authority before advertising or selling. This registration includes detailed disclosures about project plans, timelines, and financials, which has boosted trust among homebuyers.
  • As of July 1, 2024, over 1,30,186 real estate projects and 88,461 agents are registered under RERA, and 32 States/UTs have established regulatory authorities.
• Online Portals: State RERA portals provide detailed information about registered projects, allowing buyers to make informed decisions. This has significantly reduced the chances of fraud and misrepresentation by builders .
• Project Deadlines: RERA mandates strict adherence to project timelines, with penalties for delays. Developers must compensate buyers for any delays in possession, which has incentivized timely completion of projects .
  • The requirement for developers to maintain 70% of funds in an escrow account specifically for construction purposes ensures that money collected from buyers is not diverted, thus reducing project delays .
• Consumer Rights Protection: RERA has empowered homebuyers by providing a legal framework to address grievances and ensuring that their investments are protected. Buyers now have the right to a refund with interest if the developer fails to deliver as promised .
• Fair Practices:The act prohibits developers from demanding more than 10% of the property's cost as an advance before signing a sale agreement, protecting buyers from unfair practices.
  • With over 1,24,947 complaints resolved, India's rank improved to 36th in the Global Real Estate Transparency Index in 2022.

Challenges and Areas for Improvement :

• Inconsistent Application:The implementation of RERA has been inconsistent across states, with some states diluting key provisions. This inconsistency affects the uniform application of the law and may reduce its effectiveness .
• Capacity and Resources: Some states face challenges in terms of capacity and resources to fully operationalize RERA, affecting its enforcement .
• Bureaucratic Delays:The registration process in some states is slow, leading to delays in project launches and impacting developers' operations .
• Developer Compliance:While many developers comply with RERA regulations, there are still instances of non-compliance, requiring stricter enforcement and monitoring .
• Short-term Impact on Sales:The initial phase of RERA implementation led to a slowdown in project launches as developers adjusted to the new regulations. However, this is expected to stabilize as the sector adapts .
• Adjustment Period:The sector underwent an adjustment period where developers had to align their practices with the new legal requirements, affecting the pace of new project launches

Supreme Court Judgment on RERA :

• Retroactive Application:
  The Supreme Court ruled that RERA applies retroactively to ongoing projects lacking completion certificates at the time of the Act's enactment, ensuring these projects comply with RERA's provisions.
• Recovery of Investment:
  Homebuyers can recover their investment, along with interest, from builders as arrears of land revenue, safeguarding buyers' financial interests and aligning with RERA’s consumer protection goals.
• Pre-deposit for Appeals:
  Developers must deposit at least 30% of the penalty or the full amount owed to allottees before appealing a RERA order, ensuring that only genuine appeals are filed and protecting buyers' rights.
• Enhanced Consumer Protection:
  The ruling reinforces RERA’s objective to protect homebuyers, speed up dispute resolution, and prevent state governments from diluting the Act's provisions.

Way Forward for RERA to Improve the Regulation of Real Estate Sector :

• Stakeholder Engagement: Continue regular meetings with homebuyers and stakeholders to gather feedback and address real-world challenges.
• Enhance Transparency: Ensure RERA websites provide complete, accurate, and up-to-date information, including annual and quarterly reports.
• Standardize Practices: Develop standardized guidelines for information dissemination and documentation verification across all state RERAs.
• Full Implementation: Focus on full implementation of RERA before considering amendments, addressing existing challenges and improving enforcement.
• Strengthen Grievance Redressal: Enhance the efficiency of RERA authorities and tribunals to resolve complaints quickly and effectively, reducing backlog and delays.

Conclusion

The Real Estate (Regulation and Development) Act, 2016 (RERA) has significantly improved regulation in India’s real estate sector by enhancing transparency, accountability, and consumer protection. Despite the registration of over 1 lakh projects and the resolution of numerous complaints, challenges related to uniform implementation and effective grievance redressal remain. The Ministry of Housing and Urban Affairs is focusing on stakeholder engagement and data collection to address these issues and strengthen the Act's effectiveness, ensuring its continued impact on the real estate sector.