Two Years Of RERA: How Has The Legislation Fared?

A legislation that was meant to usher transparency in the real estate sector and empower buyers remains a work in progress in India.

The Narendra Modi administration rolled out the Real Estate (Regulation and Development) Act in 2017—to discipline developers, eliminate malpractices, provide consumers with more rights—which mandated that states must set up a local regulatory authority to address industry concerns. Two years later, few states have implemented the legislation and many others have even diluted the rules in the Act, taking away its essence which sought to protect the interests of the consumers.

Here’s how RERA has made an impact on the Indian real-estate sector.

Implementation Status

RERA rules have been notified in 22 states and six union territories, out of which 19 states have active online portals as of April 20, according to data available on RERA website. Five states are yet to notify the rules and 11 haven’t set up their web portals.

At least 39,855 real estate projects across India and 30,824 real estate agents have registered under RERA—of which Maharashtra accounts for half of the agent and project registrations at 20,441 and 19,699, respectively.

In contrast, not a single project has been registered with RERA in Tripura, Kerala and Mizoram despite the states notifying rules and setting up an interim authority. West Bengal has refused to implement the Act and has set up its own act—Housing & Industrial Regulation Act, 2017—which has been challenged in the Supreme Court.

Anuj Puri, chairman of Anarock Property Consultants, said that active portals, project and agent registrations have been on the rise in most states since November 2018.

Dilution Of Rules By States

Despite RERA, countless homebuyers are facing an uncertain future—and that may be due to states diluting the legislation.

The top seven metropolitan cities, according to Anarock, had a total stock of 5.6 lakh delayed housing units worth Rs 4,51,750 crore. Most of these stuck projects, said Puri, were launched years before RERA was implemented. “With many states having diluted the Centre’s original RERA rules, homebuyers have only the courts to approach—a notoriously tedious task in India.”

The Act defines an ongoing project as one “where development is going on and for which completion certificate has not been issued” but several states have added exclusion to this definition. Karnataka, Haryana, Uttar Pradesh, Tamil Nadu and Telangana, among other states, have changed this definition.

A project in Karnataka, for instance, is excluded from RERA if it meets one of the following five conditions:

• Services have been handed over to local authority.
• Common areas have been handed over to registered association comprising majority of allottees.
• 60 percent of sale or deeds of the apartment houses have been registered and executed.
• Application filed with the competent authority for the completion/occupation certificate.
• Where partial occupation certificate is obtained.

Ongoing project acquires a different meaning in Telangana, where it’s defined as a project “where development is going on and for which occupancy certificate or completion certificate hasn’t been issued but excludes such projects for which building permissions were approved prior to Jan. 1, 2017 by competent authorities”.

The number of projects in Telangana registered under RERA is 631, according to Anarock. But in Hyderabad alone, according to the property consultant, 9,600 units worth over Rs 6,270 crore are facing delays. Which means those who had invested in such projects can’t turn to Telangana RERA for remedial action.

What Comes First – Refunds Or Project Completion?

There have been instances where RERA authorities themselves denied refunds to the buyers. And that may have to do with keeping in mind the interests of the project.

Gautam Chatterjee, chairman of MahaRERA, said that the RERA shouldn’t be looked upon as a consumer court.” “We’re meant to oversee how the project will get completed so that people get their homes.” Agreed Anthony De’Sa, chairman of Madhya Pradesh RERA. “(our) primary objective is delivery of project with compensation on delay.”

He said that if the project is at a standstill, then refunds can be considered. “But if there’s a chance the project might get completed and if, let’s say, 10 allottees want to opt out, then how will the developer ever complete the project?” De’Sa said. “Other buyers who are waiting to get their homes will suffer.”

Abhay Upadhyay said this is tantamount to placing the developer’s interest over that of the buyer. “There’s no doubt that the Act wants the project to be completed… but it mustn’t be at the cost of homebuyers,” said the president of the not-for-profit Forum For People’s Collective Efforts. “The buyer has not committed his or her money for eternity to ensure completion of the project.” Upadhyay, who is also a member of central advisory council of RERA, Ministry of Housing and Urban Affairs, said that it’s the responsibility of developers to ensure project completion.

He said that the Act, in fact, empowers RERA authorities to favour refunds, a provision that’s being ignored by the authorities who tend to favour developers. “The latest judgement of the Supreme Court (Devasis Rudra vs Kolkata International City Pvt. Ltd. & Pioneer Urban Land & Infrastructure Ltd. vs Govindan Raghavan) which ruled in favour of refund for homebuyers vindicates our stand.”

Non-Implementation Of RERA Orders

Even in Maharashtra, the state with highest compliance with RERA, implementation is lax, according to Chatterjee. In 173 cases, developers are yet to refund money to buyers despite the MahaRERA ordering them to do so, he said. Regulations provide for issue of recovery warrant against the developers—through district collectors who execute them by attaching assets—when orders aren’t executed. So far Maharashtra has issued 176 recovery warrants out of which only one has been executed, with the others pending with the collector, he said.

Despite that, nearly 64 percent of the 6,631 complaints filed under RERA in the state have been disposed of. Over half of such orders were disposed of with both home buyers and developers deciding to solve the matter amicably.

A similar situation exists in Karnataka, where nearly 90 percent of the RERA’s judgements go in favour of the buyers but they aren’t honoured by the builders. Most of the judgments pertain to delayed compensation, refunds, cancellation among others, said MS Shankar, convenor of Fight for RERA-Karnataka Chapter.

“The biggest problem that complainants face is non-implementation of the orders passed by the RERA authority,” said Upadhyay. By just issuing recovery warrants, he said, RERA authorities can’t wash their hands off the matter. “It’s their responsibility to take all steps to ensure that home buyers get their due.”

Lack Of Infrastructure

The Act mandates that developers must provide updates about the project’s status and deposit 70 percent of the money received for it in an escrow account. It remains to be seen whether the authorities check whether the developers adhere to these regulations.

Samir Jasuja, the founder of real-estate consultancy portal PropEquity, blamed it on lack of infrastructure. There’s no team on ground that would audit the data provided by the developers, he said. “Some sales numbers reported on the RERA website aren’t correct and there's no proper mechanism to verify them.”

Has RERA Helped The Sector?

One of RERA’s main objectives was to bring in transparency and reduce the trust deficit between the home buyer and builder, helping the industry bounce back from a slump brought about by the introduction of the goods and services tax, demonetisation and a crackdown on benami property (or property held via proxy).

Niranjan Hiranandani, national president of National Real Estate Development Council, thinks it has. “The sector has witnessed the positive benefits of the Act in terms of enhanced confidence index of domestic as well as NRI home buyers turning back to home for investments.” He said the industry has seen traction in sales inquiries from “fence-sitters” who’re willing to buy homes. “This is a result of transparency and protective nature of home buyer’s interest enacted in the RERA Act.”

He said that consumer complaints must be addressed in a streamlined manner. “When a developer fails to deliver on time, the consumer of that project has can approach consumer fora like the RERA or NCLT,” he said, adding that they have different modus operandi, resulting in varied outcomes ranging from ordering refunds to dragging them into insolvency. “Our appeal at the appropriate fora is to have a common goal in completing the projects with the necessary support and delivering the homes to the buyer.”