The Real Estate Regulation Act (RERA) finally got a passage in 2016, thereby meeting a long-standing demand from the real estate industry for a central regulator. RERA was largely created to ensure accountability towards allottees, protect their interests and establish symmetry of information between the promoter and allottees.
The Act was a significant sentiment booster with end-user interests protected and developers held accountable for non-compliance. The Act had varying levels of impact on all stakeholders—promoters, end-users, investors, real estate agents and financial institutions/lenders — the main being the promotion of fair play in transactions, while ensuring timely execution of projects and protecting the interest of consumers.
RERA changing the real estate landscape
> Centralized Authority: The establishment of authority provided the much-needed regulator for the sector, thereby allowing a check on developer background, completion timelines, funding, and construction quality among other things.
> Redressal mechanism: A formal mechanism for protecting end-user interests also comes into force for the first time as consumers now have a dedicated authority that can be approached for real estate related grievances.
> Authenticity of information: Initially, lack of authentic resources was a challenge owing to unverified developers/builders contact details, crippled further by limited availability of information. RERA requires mandatory, and legally verified information from the builder that is further certified by the respective RERA authority.
> Transparency: The provisions of the RERA require the builders to update on regular intervals about the construction status of the projects, which instils confidence among the buyers of property in the projects. Also, there has been standardization around factors such as calculation of carpet area, amongst others thereby reducing ambiguity.
> Inclusive: The Act finally covered another very important stakeholder—the real estate agent—through the mandatory registration process and other compliances and bought these facilitators under the purview of the Act. Since enactment, over 50,400 agents have registered under RERA across the country.
> Balance and Accountability: The focus of the act was always end-user interest and increased accountability which was evident with clauses such as development firms paying interest for any default or delays at the same rate that home buyers are charged and also the fact that builders were to be liable for structural defects for five years.
Impact of RERA on residential real estate
– Increased instances of consolidation of players and joint ventures/partnerships in the sector.
– The transparency and credibility of the deals have improved significantly with the exit of smaller/non-reputed brokers.
– Boost in buyer sentiments and a simultaneous rationalization in home loan rates has triggered end-user driven demand, especially in the mid-segment/affordable housing.
RERA: The road ahead
With RERA completing four years, the Act is a definite step towards bringing in greater transparency to the realty sector and moving away from characteristics it has long been associated with—unorganized and lack of accountability.
To help RERA achieve its true objective, it is important to address concerns regarding the lack of responsibility of the authorities as the buck currently stops at only a few stakeholders, particularly promoters of projects – with no specific penalties spelt out for the authority in case of non-compliance with approval deadlines.
The Act needs to take more concrete actions to address key issues such as setting up a single-window clearance should be a priority as it will streamline the approval process and cut down costs and delays significantly.
The ‘Modern Building Bye-Laws, 2016’ can also serve as a reference point, as they emphasize the digitization of the documentation/approval process, integration of certain clearances at a Master Plan level, out-sourcing of certain procedures on behalf of the authority, among other initiatives, to cut down on the time taken for approvals/clearances.
In addition, a risk-based classification of building proposals would fast-track building permission procedures for all non-automatic approvals.
– By, Anshuman Magazine, Chairman & CEO, India, South-East Asia, Middle East & Africa, CBRE