RERA- A LONG WAY TO GO

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The real estate sector has assumed prominence in the past decades. This fact can be attributed to the developments in this sector. This has, in turn, led to the increment in the demand in the housing sector which has led the developers and the builders to assume a position of predominance. Before the Real Estate Regulation and Development Act (RERA) the builders got away with their one-sided agreement tossing up the conditions in favor of the builder/developer. This made the buyer suffer impediments like delay in delivery of possession, unreasonable rates, etc. But this legislation came as a cure for everything. It introduced parity, unbiasedness, fair dealing in this sector. However, its implementation in states and union territories seems to fail the initial objective of the central legislation. 

Overview of the RERA Act

The real estate sector has always been a preferred asset by all classes. But with time, certain mistrust has developed. Between navigating the built-up area, carpet area, missing amenities promised at booking of homes, diversion of money received towards one project to more lucrative ones, the mistrust is justified. However, the Real Estate Regulation and Development Act (RERA) gave the real estate sector its first regulator. RERA was implemented from 1st May 2017, and subsequently, the Goods and Services Tax (GST) become applicable from 1st July 2017 on it. The Act was introduced with the intent of bringing in more transparency in the existing real estate sector of the country with rebalancing the lopsided buyer-builder relationship. The objective was quite simple: standardizing the practice related to the purchase and sale of real estate and to bringing transparency and better accountability in the real estate sector. The provisions are designed to attract and effectively manage the investments in the sector. 

Mileages

RERA Act has mandated the establishment of the state-level regulatory authorities for the successful implementation of this Act. Further, the Act has mandated the states to develop a website for the buyer so as to make the home buying process more convenient. 

Further, to cover land and construction costs the Act ensures that 70 percent of the money taken from the buyers has to keep in separate bank accounts so as to use this money for the purpose of the construction only.1 Also, the developers are mandated to full disclosure of all information regarding the details of the project, land, etc. 

To ensure standardization the Act has given the definition of the term carpet area. Before this Act, there was no standard method of calculating the carpet area. Every developer has its own method to calculate it. This was creating a problem as most of the developers charge on the basis of carpet area and for increasing the cost of the property they use the inflate the area. Now the definition of carpet area has been introduced by the Act and all the developers are required to follow the same formula for the calculation. 

Further to ensure parity the Act has given the same rate of interest for both parties. Before the legislation, the rate of interest paid by both parties was not the same. Usually, the buyer has the pay the higher amount of interest then the builder when there was default on the part of the buyer, but this was not the case when the builder defaulted. There was no parity in the interest paid. But now the rate of interest for both the buyer and the builder are the same. To further ensure that the buyer is safeguarded, the Act put the liability on the developer to compensate if there is a delay in the delivery of possession.

To ensure the responsibility of the real estate advisor or the broker, the legislation has added certain sections of penalty. If the real estate advisor fails to mandatorily register himself as one and fails to follow the rules and regulations, he will be subject to a penalty of Rs 10,000 a day till the time the default continues. This could go up to five per cent of the total project cost for which the transaction was facilitated. Similarly, a broker will have to face a penalty for each day in case he fails to comply with or contravenes the orders of the Real Estate Regulatory Authority (RERA). This, too, could go up to five per cent of the total project cost for which the transaction was facilitated. Also, he could face a jail term of up to a year or a penalty that could go up to 10 per cent of the total project cost, or both, if he fails to comply with or contravenes the orders of the Appellate Tribunal.

For dispute resolution, RERA can be said to be effective. Taking the example of Maharashtra which is arguably the most advanced state in implementing the RERA scheme the statistics tell us that over 5000 complaints were filed and around 3100 orders were passed. 

Where it is still lacking?

The major fallacy of the RERA is in its implementation and that arises because of the inconsistency that seems to be there between the objectives of the central legislature and the state legislature. Although the central Act made it mandatory for the states to formulate the rules for the functioning of the regulator, it is still not done by many of the states.2

The central legislation also included an aspect of launching the website, which would provide homebuyers important information such as name and details of the developer, promoter and details of the project, dates of delivery and possession etc. Also, the website would be enabling a homebuyer to file a complaint. Many of the states have still not launched the websites and the websites that are launched are of little help to the buyers.3

It is clear from the above-stated provisions that RERA was made with the objective of making it easier for the buyer. But the unfortunate part is that this objective was only of the central legislature and not of the state legislature. The central law made it mandatory that the developer will provide all documents related to land on the project is being made. If the land title is defective and the buyer suffers the loss, the liability is on the developer to compensate for the buyer. However, in the state of UP, the law is silent in the on the point of compensation. This gives advantage to the developer. Also, there is no liability on the developers to fix any structural flaws, if any arises which is quite unlike the central law which states that the developer will be liable to fix structural damages till five years. 

Another inconsistency which arises in the objectives of the state and central legislature is that the central RERA aims to achieve the safety of the buyer by including the clause that the builder will have to give the details of the launch and delivery and in the case of ongoing projects the build would have to give the time of launch and delivery. But many state legislatures have diluted the ‘on-going’ clause in such a manner that the unfinished projects are not coming under the ambit of RERA.4 The central rule states that the builder will have to give the time of delivery in accordance with the pending work. But the legislation of the states such as UP and Haryana are missing this provision.

The executive failing the objective of the centre can also be seen in Haryana, where the projects that have been issued by the licensing authority but the construction is still not started. These projects are not covered under the amendment made by the Haryana government.

Conclusion and Suggestions

In the last two years, the Act has brought some major changes in the sector such as increasing joint ventures, registering of projects, timely delivery of possession etc. which have ensured a positive impact on the buyer sentiment.5 But it can be said on the basis of the above analysis that the objective of the central legislature with regards to this Act has not been fulfilled because of what seems to be appearing as a collusion between the state governments and developers. 

To eliminate this collusion and regain the trust of the buyer the RERA can be implemented centrally, with giving the scope of minor changes to the state legislature. Also, the authorities such as municipal corporations who play a key role in the business of development should be brought under the ambit of the Act so as to ensure transparency. Further, it is important that the Act is not diluted by the state legislature. To ensure this the state regulatory authorities should be given enough power to keep a strict vigil.

Endnotes

1.  REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016

2.  Khushru Jijina, Two years of RERA: Review and the outlook going ahead, (May 6, 2019) available at https://www.businesstoday.in/opinion/columns/two-years-of-rera-review-and-the-outlook-going-ahead/story/343874.html

3.  Two years of RERA: Implementation still patchy in many states  available at https://www.livemint.com/industry/manufacturing/two-years-of-rera-implementation-still-patchy-in-many-states-1557058082966.html

4.  Ashwini Kumar Sharma, Rera’s three-year report card shows gaps in implementation, (07 May 2019) available at https://www.livemint.com/money/personal-finance/rera-s-three-year-report-card-shows-gaps-in-implementation-1557237162103.html

5.  Rajiv Sahni, Focus on buyers: loopholes remain available at: https://www.ey.com/in/en/newsroom/news-releases/published-editorial—focus-on-buyers;-loopholes-remain


Kriti Mehortra

Author

A very obedient and sincere personality who keeps herself updated about the recent happenings in the field of law and policy. She is a brilliant orator and a very confident writer. She loves to help others and work hard to achieve her goals. For any clarifications, feedback, and advice, you can reach her at kritim1611@gmail.com


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