A year after the Real Estate Regulation and Development Act, 2016 (RERA) came into effect, 20 out of the 28 states (the Act is not applicable in J & K) have implemented the rules or framed their own laws to carry out the mandate. Satvik Varma, a litigation counsel and corporate attorney based in New Delhi, in his article titled ‘The RERA Report Card’, published in The Hindu on May 26, 2018, writes, “In some states such as Uttar Pradesh, the Act’s provisions have been watered down in favour of builders by altering the definition of ‘ongoing projects' which need registration under RERA. There is also a dilution on the penalties for non-compliance.”
Similarly, the speedy dispute redress mechanism envisaged by the Act is yet to take shape. Apart from Maharashtra, only Punjab and Madhya Pradesh have appointed a permanent regulatory authority (to be established within a period of a year). To ease the transition, RERA allows state governments to designate an existing body as the regulatory authority until a permanent one is established. This has resulted in 13 states working with only a designated regulatory authority. West Bengal is yet to even designate a regulatory authority.
The report states, “Additionally, only six states have set up the online portal contemplated by the Act. In the north-eastern states, RERA has been challenged on certain constitutional grounds of land belonging to the community and autonomous councils.”
The real estate industry in our country, especially those in the residential sector, were largely unregulated and unorganised, thereby, not having a control over delays, quality of construction, etc. The implementation of the RERA was to bring in a qualitative change in the way the industry operated and was aimed at safeguarding the individual buyer by being efficient, transparent, and accountable.
“In Tamil Nadu, where the CREDAI (Confederation of Real Estate Developers’ Associations of India) is very active in all the districts and cities, RERA has been quite well accepted by the companies in the real estate industry. We have about 140 members in Chennai alone and more than 300, state-wide. We have found that following the RERA guidelines have been advantageous to our dealing with buyers as there is a lot of transparency in the way we do business. Still, about 80 % of the developers are in the unorganised sector and slowly they are falling in line with the guidelines. It has also resulted in the consolidation among smaller developers,” said W.S. Habib, President, CREDAI Chennai Chapter.
Despite the churn it causes, consolidation in real estate is inherently positive as it results in a more streamlined and customer-friendly landscape and also helps players to become more efficient and effective in conducting their business. “It is certainly an interesting trend which benefits the real estate industry as a whole by opening up multiple opportunities for companies, developers and real estate consultancies. However, the fact that consolidation also involved the brutal elimination of few smaller players can, of course, not be ignored either. Like most change, this one involves a considerable amount of pain for the stakeholders involved,” said Shobhit Agarwal, MD & CEO - ANAROCK Capital.
According to Habib, “CREDAI has worked hard to make the industry more organised and progressive by working closely with government representatives, policy makers, investors, finance companies, consumers, and real estate professionals. Acting as the voice of India’s real estate industry, CREDAI has been the guiding force for the growing real estate sector in India bringing more transparency. Its success in bringing the majority of organised private real estate developers under a single umbrella promises the rapid development of the realty
sector, one that knows itself as a major driver of India’s economic growth.”
The Real Estate (Regulation and Development) Act, 2016 aims at protecting the purchasers and boosts the real estate investments. In his article, ‘How RERA is revolutionising Indian real estate’, Anuj Puri, Chairman – ANAROCK Property Consultants, writes, “The Indian real estate industry, particularly the residential sector, was in the past correctly characterised as being unregulated and unorganised with unreasonable project delays and poor quality of construction being definitive aspects. The arrival of the Real Estate Regulatory Act (RERA) in March 2016 brought in a paradigm shift in the sector and metamorphosed it into a more mature, systematic and regulated one. RERA came into force on May 1, 2017 and is meant to be a homebuyer-friendly regime which will address their grievances and promote transparency, efficiency, financial discipline and accountability in the sector. Indeed, buying a home is not only the most cherished dream for many Indians but also one of the biggest long-term financial commitments in the buyers’ lifetime. Considering this, there are (14) important guidelines incorporated in the RERA umbrella to prevent unscrupulous players from raining on consumers’ homebuying plans.”
Habib says that CREDAI has been continually conducting workshops for its members to understand the various aspects of RERA and this has helped a great deal in conducting their businesses in a most ‘above board’ way. He informed, “Our membership norms are very stringent as we would like to have amongst us those who have been doing legitimate business and having high credibility. At one point, our stipulation was that the member-applicant should have completed and sold three lakh square feet of property. We later brought this to four lakh square feet. Following RERA guidelines and mentioning a CREDAI registration number while advertising and marketing a property project, brings in a lot of trust to the member builder/developer.”
While the RERA effect is positive in the long term, the CREDAI members and others in the industry feel the GST factor to be a thorn in the flesh. Habib informed, “We are making strong representations to the GST council to bring down the rate from the current 18% to 6% or 7%, which is more conducive to doing legitimate business. The GST burden on the buyer is enormous and we are seeing a slowdown in business.” With the government directive that all states should adopt RERA and also launch their individual websites to propagate RERA among the localised builder/developer community and associations, the real estate sector is headed for a total overhaul in the way they conduct their business.