As the first anniversary of RERA draws closer, so does the knowledge that the implementation across states is nowhere close to its goal.
Most states only have an interim regulator while only 3 states Maharashtra, Madhya Pradesh and Punjab have established a permanent one so far.
On May 1, the Real Estate (Regulation and Development) Act, 2016 or RERA will turn a year old. Although certain sections of the Act were introduced on May 1, 2016, it came into force in its entirety on May 1, 2017.
Before RERA, there was no real estate regulator in the country due to this many builders took homebuyers for a ride. Delays were rampant and homebuyers usually did not have a reliable source to address their grievances.
Hence RERA was enacted with the objective to 'set in motion the process of making necessary operational rules and creation of institutional infrastructure for protecting the interests of consumers and promoting the growth of real estate sector in an environment of trust, confidence, credible transactions and efficient and time bound execution of projects.'
However, on RERA's first anniversary, the progress so far, may not be much to write home about. Releasing a whitepaper on RERA completing a year, real estate consultancy firm, Knight Frank India states, "The progress on RERA compliance across the country still presents a gloomy picture. As the first anniversary of RERA draws closer, so does the knowledge that the implementation across states is nowhere close to its goal."
Here is look at some of the hits and misses of the real estate Act that was supposed to bring about transparency in real estate and protect the interest of homebuyers.
Has the homebuyer benefitted from RERA? Before RERA, most builders took buyers for granted, swindled funds to different projects thus leading to delayed delivery across several cities. Many buyers, especially those who had booked after 2012-13, are still awaiting possession.
Now with RERA in place, both new and ongoing projects are to be brought within its fold. State RERA authorities need to be more stringent and not let a single ongoing project remain outside the purview of the Act. In a recent development, the Haryana Real Estate Regulatory Authority imposed a fine of Rs 10 lakh on a developer for its failure to register one of its ongoing projects. Once an ongoing project is registered, the homebuyer at least have a fighting chance for a quick delivery of their home.
However, this is not the case with several states. Some have diluted the definition of 'ongoing projects' and thus many properties remain outside the ambit of RERA. Sadly, because of this, homebuyers still continue to suffer with non-delivery of their home or below-par quality of construction.
On the price front, the runaway prices movement on fresh bookings may have come to a pause in most cities. According to real estate research and analytics firm PropEquity, "Housing prices fell by an average 7 per cent during January-March in nine major cities over the previous quarter as developers cut property rates to boost their sluggish sales."
As it is the supply of ready-to-move in unsold properties is still high and new project launches have been low across cities barring a few. Instead of cutting prices, builders have been offering goodies to lure in buyers like free parking, club memberships, and furnished homes to unload their unsold inventory. Going by property consultant ANAROCK, "Housing sales rose by 12 per cent in seven major cities to 49,200 units during January-March period over the previous quarter on better demand from end-customers post enactment of new realty law RERA." The resale market might have seen this activity in the last one year also because goods and services tax (GST) is not applicable on ready-to-move in homes.
This is how Knight Frank sums up the real estate price movement in its whitepaper: "In the past one year, RERA compliance in some markets has been a prominent factor for price rationalisation in the residential segment as it has put a break on pre-sales activities and fund mobilisation by developers' at the once popular "soft launch" stage. There have been instances where developers have resorted to selling inventory at a marked discount in a bid to raise finances as no sales at pre-launch stage are allowed now."
So why is it still business as usual in the real estate sector despite the introduction of RERA? The lackadaisical attitude of the authorities could be a reason.
State progress report Each state and union territory (UT) were supposed to have their state rules notified, have a state regulatory authority (RA) and appellate authority established, and also have a state-specific RERA website by July 31, 2017. However, not all states have established the permanent RA as yet and some of them have even diluted the original provisions as per the central Act.
Shishir Baijal, Chairman and Managing Director, Knight Frank India, says, "The Real Estate (Regulation and Development) Act, 2016 that became a reality last year is a path-breaking law, with immense potential to revive buyers' confidence and drive momentum in the residential real estate market. States such as Maharashtra, which implemented the regulation in true letter and spirit, witnessed signs of uptick in residential sales and overall consumers' sentiments. While it has been observed that just over one out of 10 state governments showed the political will and gravity in executing the Central act, we believe that other states would soon follow suit. We have maintained in the past that the resurrection of the Indian real estate rests on the long-term benefits of such structural reforms."
On July 31, 2017, out of 28 states, only 15 states had notified the rules. Here's what the status is as of today: RERA is applicable across 28 States (except Jammu and Kashmir) and 7 UTs. After a year, additionally only 5 have notified them with 8 states still remaining out of the RERA ambit.
According to the whitepaper, "The RERA rules have not yet been notified in West Bengal, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura. Further, most states only have an interim regulator while only 3 states Maharashtra, Madhya Pradesh and Punjab have established a permanent one so far."
State regulatory authority It is not just implementation of RERA, not all states even have the permanent RA in place and continue to function with interim regulators. As per the report, "Only Maharashtra, Madhya Pradesh and Punjab have established a permanent one so far."
Source: Knight Frank Research Note: The table above includes states and UTs with both Permanent and Interim Real Estate Regulators and Appellate Tribunals As per information on April 23, 2018.
Information on websites One of the tasks is of the state RA is to maintain a website with information regarding all real estate projects for which registration has been given. On the state RERA website, one can either search for RERA registered projects and also for projects handled by registered real estate agents.
Out of the states where RERA is notified, 4 states - Assam, Chhattisgarh, Haryana and Odisha - and 1 UT Delhi National Capital Territory (NCT) do not have a website till date. The kind of information that is available even on most of the websites is abysmal and hardly anything can be used for taking a buying decision.
Here's a list of all the 13 states that have their websites.
RERA's tough stand In the past one year, not all state regulators have taken a tough stand against errant builders. Here is how Maharashtra RERA fined a builder for violation of rules. Further, Karnataka RERA had recently said that the provisional registration number initially allotted to builders was only to be treated as an acknowledgement for the Application for RERA registration. For new sales effective April 1, the approved RERA registration number shall be required to be taken from RERA.
What should a homebuyer do? As a new buyer in the re-sale market, make sure that the promoters of the project you are buying into have received the completion/occupancy certificate. For fresh bookings, the one single piece of information that can prove to be the saviour to a large extent will be the project's permanent registration number provided by the state's Regulatory Authority. Ask for it even before you make a visit to the project site.
The litmus test will occur when the builder is able to deliver the project as per the timeline submitted to RERA. It is still few years away. There are enough provisions within the Act to compensate the homebuyers in case of a default or delayed delivery which all remains to be tested. In the meantime, state authorities need to take stringent steps in order to restore the confidence of the buyers. Making the builders upload relevant and complete information on the state RERA website about the projects is just one small step towards it.
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