Photo: Hrishikesh Bhatt
The promulgation of the law for regulation of the businesses related to real estate through a designated authority is a welcome move. Besides reassuring both consumers and builders, this may also bring investments both from back home and abroad to give a much needed fillip to the trade
The Real Estate Regulatory Act (RERA) is a watershed moment in the journey of Real Estate industry in India. It is a very welcome move to provide a uniform regulatory framework to all stakeholders, ensure speedy adjudication of disputes, timely delivery of projects and will propel the growth and establishment of an ‘organised' real estate sector in the country. In many ways RERA is going to be another game changer for the industry, akin to the setting up of Securities and Exchange Board of India (SEBI) which had created a new environment for capital markets and led to its multi-fold expansion- Real Estate is on the cusp of witnessing such a change.
The thrust of the Act is on transparency and security of the consumer along with standardisation of processes, procedures and accountability. Real Estate is the backbone of an economy – it contributes significantly to employment and income generation and thereby to the economic development of the nation. This Act is aimed to instil confidence among buyers and further boost domestic and foreign investment in the Real Estate sector.
The RERA aims to provide a framework and regulate transactions in both residential and commercial projects and ensure their timely completion and delivery. The Act establishes a uniform and balanced rights and obligations for both the buyers and the developers. It will remove the long standing stigma of one sided agreements, varying definitions of saleable areas, end use of moneys collected from the customer while discouraging speculative purchase and non-payment of moneys due to the developer which is an equal menace.
Micro or tiny real estate players have been kept out of the preview of this Act by limiting the registration of the only those projects whose area of land proposed to be developed exceeds 500 square metres or the number of apartments are more than eight. Further the State Governments have been given discretion to reduce the above threshold for exemption of registration under this Act. Also in case of real estate projects which are to be developed in phases, every such phase shall be considered a standalone real estate project. The developer is required to obtain registration under the act for each phase separately. This is an exemplary thought through move appreciating the challenges of a large multiphase development.
Exemption from the registration is further extended to the completed projects where the Completion/Occupancy Certificate has been received prior to commencement of the Act. Projects involving renovation or repair or redevelopment, which do not involve marketing, advertising, selling or new allotment of any apartment, plot or buildings as the case may be, are also exempted. The Government has, therefore, lived up to its promise of no retrospective legislation which has been much criticised in the past.
Also, time bound and deemed approval shall put the real estate projects on fast track mode without creating any red-tapism. With reduced ‘time to market’ the developers will now be able to plan their project launches and cash flows better and efficiently.
The Act is now clearly defining the industry terms like 'carpet area', 'common area' thus removing ambiguity for all, providing a level playing field for the industry, while protecting the interests of the consumer. The Act has put particular emphasis on consumer protection by putting restriction on the developer on transfer or assignment of their majority rights and liabilities in respect of their project to any third party. Prior written consent of two-third allottee(s) and permission of the Regulatory Authority is required for the same.
Transparency has been dully taken care in the Act by making it mandatory for the Developers to provide and upload all project related details on the website of the Authority. Every minute detail will be available by putting them in public domain. The developer or promoter will be required to create his webpage and provide all the details of his project on the same. Also, the real estate agents and brokers need to quote their 'registration number' on every sale facilitated by them. This brings a very important player in the industry under the preview of this Act.
A regulatory oversight mechanism will be framed to enforce accountability norms for developers, buyers and real estate agents. The developers are required to get their project financials audited within six months after the end of every Financial Year by a Chartered Accountant in practice and shall have to produce a Statement of Accounts duly certified and signed by such a Chartered Accountant to the Real Estate Regulatory Authority. This will force the industry to be more compliant and transparent.
Also to avoid multiplicity of litigations, a home buyer needs to withdraw his case if already filed in a consumer court, before filing it with the Regulatory Authority. However the principles of natural justice have been enshrined wherein both the buyer and/or the developer can challenge an order by filing an appeal in the Appellate Tribunal.
However, provisions like imprisonment to the developer seems very harsh, as a project is not delivered in isolation – multiple stakeholders have to play their designated role and are equally responsible for success of the project on time. While malafide intentions and wilful default need to be punished, just hope that the Regulator will take into account the intention and credibility of the developers before taking any harsh decision. Good news is that these penal provisions will wean out small and fly-by-night operators and only such developers who will deliver on time, quality projects will survive and possibly also thrive. This is a win-win situation for the industry in the long run.
The writer is Chairman and Managing Director of Raheja Developers