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Posted at: May 21, 2018, 12:37 AM; last updated: May 21, 2018, 12:37 AM (IST)REAL ESTATE REGULATORY AUTHORITY

Rearing of RERA

The real estate regulator has shown that it can shield the gullible consumer from unscrupulous property developers. It has, however, lost its punch in several states due to the dilution of its provisions, says Rajeev Jayaswal
Rearing of RERA

Narinder Pal Singh and his wife Harvinder Kaur had dreamt of owning an apartment at API Golf Links-II in Mohali. They had already made an advance payment of Rs 6.53 lakh for the same to its promoter, Ansal Properties & Infrastructure Ltd in March 2012. At the time of signing the buyer's agreement the couple was assured that the possession would be handed over in 36 months. The same was executed on April 9, 2012. Based on the assurance they invested a total of Rs 23.30 lakh in the project that year. To their utter dismay the construction at the site was nowhere near completion even after 72 months. Running out of patience, they approached the Real Estate Regulatory Authority (RERA) of Punjab last month seeking justice. The authority directed the company to refund the entire sum to the complainants with interest at 2 per cent higher than the SBI's "highest marginal cost of lending" rate. 

The loopholes

This is an example of swift justice, something unheard of in the Indian property markets until RERA became a reality in May last year. But, all aggrieved property buyers are not as lucky as Narinder Pal Singh and Harvinder Kaur. Real estate developers know of several loopholes to circumvent RERA. Most of the complaints related to projects commenced well before the establishment of RERA are declined by the authority as "not maintainable" because these projects are not registered with it. The RERA registration has been avoided deliberately by the unscrupulous developers. This is one of the major practical problems associated with the newly enforced customer-protection law as most of the disputes between developers and buyers date back to pre-RERA period. 

The authority recently rejected a complaint because the project was not registered with RERA. While directing the state agency to get the real estate project registered with the authority it said: "Without getting the project registered no promoter shall advertise, market, book, sell or offer for sale or invite persons to purchase in any manner any plot, apartment or building as the case may be." 

Growing customer awareness will, however, force builders of old projects to get RERA registration in order to sell the remaining units. This will give a chance to the aggrieved buyers to approach RERA again. 

Minimum deterrence

Disputes coming to the regulatory authority are often resolved automatically. However, there have been several cases where the aggrieved customers and accused builders settle their dispute outside the authority. Upon mutual agreement, the petitioner withdraws the complaint. Most of the builders prefer to settle the dispute outside the court to save time as well as their reputation. They know that authority's one verdict against them could invite trouble from their other customers. This is good news as the RERA's presence has worked like a deterrent for builders. It has emerged as a symbol of consumer empowerment. The institution has remarkable impact on the regions where it is working efficiently. According to a Knight Frank research, recent judgments by the RERA in Maharashtra have been "successful in restoring buyer sentiment" as some judgments have been delivered within a month of registering a complaint. So far, MahaRERA has ruled in over 1,000 cases since September 2017. Comparatively, the Punjab RERA is far behind with just 87 cases.

State of affairs

Is RERA fully armed to tame the tribe of unethical builders and real estate brokers? The answer is, no. It still has a lot of ground to cover. The reason lies in the implementation of model RERA that was enacted by the Centre in 2016. As real estate is a State subject, the responsibility of its effective implementation lies with the state government. Although some states such as Maharashtra, Madhya Pradesh and Punjab have kept the spirit of the law intact, most of the states have considerably diluted its punch while enforcing the same in their respective regions. According to the Knight Frank report, as on April 23, 2018, eight out of 28 states (J&K is outside the Act) had not notified the RERA rules. These include West Bengal, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura. Most of the states with the RERA had lacked functional portal and appellate tribunal. State-wide variations in the set up of authority are also confusing for buyers. Instead of state-specific websites, the Centre should anchor a common portal for the RERA under the Ministry of Housing & Urban Poverty Alleviation. 

This task is not very difficult for the union government. An institutional mechanism is already there. A 30-member Central Advisory Council (CAC) is already in place. The council is expected to advise and recommend the Central government on matters concerning implementation of RERA across the country. It is primarily mandated to protect the consumer interest. It is also expected to foster growth and development of the real estate sector and can play a major role in establishing some uniformity in real estate regulations across the country. 

Uniformity will not only be cost effective but also consumer friendly. This is possible especially after the successful implementation of "one nation, one tax" regime through the GST. There is an urgent need for the Centre to again take the lead and help states to set up the regulator with basic uniformity, particularly in the website architecture, which is the first point of interface for the consumer. The Centre can adopt a carrot-and-stick approach to prod states - incentives for compliance and penalty for defiance. The Modi government at the Centre can take a lead in strengthening RERA by prodding the BJP-ruled states to adopt a stronger and uniform authority structure.


The key benefits

Home buyers

  • Quality product, timely delivery

  • Ascertains builders' track record

  • Ends sham of super area

  • Booking amount limited to 10%

  • No pre-launches of non-existent units

  • Money invested remains safe

  • A reliable redressal mechanism

Industry

  • From unorganised to regulated sector 
  • Corporate branding
  • Project efficiency and timely delivery
  • End of fly-by-night operators

  • Greater investor/customer confidence

  • Higher institutional funding

  • Sector consolidation


THE MODEL CODE

Chronology

2016: The Real Estate (Regulation and Development) Bill was passed by Rajya Sabha on March 10 and Lok Sabha on March 15. President approved it on March 25. It was published in the Gazette on March 26. Certain sections of the Act were notified on May 1 

2017: Remaining sections of the Act came into effect from May 1

The Act

  • Act is applicable on both residential and commercial properties

  • Registration with RERA is mandatory for real estate projects of 500 square meters or more and eight apartments and above 

  • Real estate agent selling plots, buildings or apartments also needs RERA registration 

  • Promoter needs to make all details of the project public

  • Every state and UT must have an authority and adjudicating officers

  • The Union to set up a Central Advisory Council 

Public Disclosure

  • Authority is responsible to maintain a website for public viewing

  • It must display details of RERA registered projects including photographs of their promoters

  • Details of registered agents and their photographs 

  • Promoters of ongoing projects must disclose originally sanctioned plan and modifications; status of the project; money collected and spent 

Offences and Penalties

  • Imprisonment for non-registration; compounding fee of 10% of project cost

  • Imprisonment for non-compliance of order of Tribunal by promoter/agent/allottee; compounding fee of 10% of project cost

  •  

RERA Punjab

It was notified on June 8, 2017 and set up on August 10, 2017 after the joining of Chairperson Navreet Singh Kang and full-time members Sanjiv Gupta and Jagdish Singh Khushdil. According to its website, the Punjab RERA has ruled in 87 cases since September 13, 2017

What you need to know

  • RERA is applicable to public bodies including development authorities and housing boards

  • Open parking areas cannot be sold to the allottees. But garages can be sold to the allottees independent of the apartment

  • Community and commercial facilities which are provided in a real estate project are part of common areas, to be handed over to the association of allottees 

  • RERA also covers ongoing/incomplete projects awaiting completion certificate. Such projects need RERA registration within 3 months of establishment of the authority

  • Like real estate agents, websites engaged in selling property also fall under RERA

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