The real estate in India has been one of the biggest industries contributing significantly to the economic growth and boom in the country. However, inspite of the strength of the industry, it has also been criticized for being unfair and unorganized in its practices. Past two years, the real estate industry has seen a significant slow down and a slump, that has been attributed to a huge gap of expectations vs. deliverables between the realtors and buyers. Real Estate developers have been taking project delivery deadlines too lightly resulting in major delays causing serious grievances among buyers.
The malpractices have often been highlighted, bringing upon a strong need of the regulatory systems to tighten their reigns on the segment and to promote fair trade practices. In lieu of this need and requirement, the RERA act has been introduced to standardize and keep a close watch on the real estate industry, so as to make practices fair for both consumers and the realtors.
What is RERA?
While the RERA bill, was introduced in the parliament as early as 2015, there have been significant discussions and alterations before it was passed in 2016 and came into implementation as RERA Act 2017, from 1st May, 2017. The act has come across as one of the strongest measures to bring about a sense of discipline, accountability and responsibility in the real estate market, which certainly has various positive implications on the property buyers as well as the developers. It is also being seen as an opportunity for the realtors to instill a sense of commitment and dedication in their way of working as there is now a stronger force governing their actions.
So, what is RERA and how does it affect the realtors as well as the buyers at large? According to the RERA act in India, every state and Union Territory shall henceforth have its own regulatory authority whereby the rules and regulars shall be framed in accordance with the act. This brings upon the state authorities a sense of responsibility and accountability to govern the real estate developers and the projects under a certain set of guidelines. This is in turn a huge step to regulate India’s real estate market.
Key Highlights of the RERA Act Which Benefit the Consumer.
‘Consumer is the king’, a marketing prophecy which form the base of the RERA act, goes a long way in protecting the interest of the home buyers who invest their hard earned monies into buying their dream home.
To buy a home in India, is still seen very conservatively due to the huge investments involved. A home is treated as a major asset and hence there need to be guidelines governing buying and selling of properties so as to make the home buyers feel more secured about the investments they make.
There are certain regulations that have been set as mandates for the states to follow under the RERA act, which will benefit the property buyers as well as regulate the operations of developers to stay committed towards the end consumers. Some of the key highlights are as follows:
- Better Redressal Forum:So far, the end consumer always faced the brunt developers actions be it in terms of unreasonable or hidden cost hikes or unaccounted project delays. If a consumer had to make complaints to seek justice, he would be forced to move between consumer and civil courts, which was a tiring affair. However, how with the act coming into force, consumer interest and rights are better protected, with the presence of the real estate regulators for redressal.
- Registration of Projects to Ensure greater Transparency:The RERA Act 2017, makes it a mandate for all commercial as well as residential projects, wherein the land measure over 500 mt. or the project comprises of eight apartments or more to formally register the project with the regulatory authorities, before going in for a public launch of the project. This regulation in the act ensures timely project execution and delivery along with transparent and fair marketing. Failure to deliver the project on time, makes the developer subjected to a penalty that may extend upto 10% of the project cost. Repeated delays could also put the developer at a risk of landing into jail.
- Check and better utilization of Buyer’s Money:The act regulates and channelizes the buyers and investors money, by instructing the real estate developers to consolidate and put across 70% of the money collected from the buyers into a separate account and utilize the same towards completion of the project. This cap was necessary, as most of the developers procure amounts from the buyers and utilize the same towards newer projects rather than focusing the money towards completion of the current project. This regulation puts a check on the developers and will ensure timely completion of real estate projects.
- Bring about stability in real estate and housing prices:The act is likely to enhance the buyer confidence which in turn is likely to infuse more investments and funds into the real estate segment particularly for the home buyers. This will have a positive impact, correct the inflation and help in stabilizing the housing prices.
- Ensuring a check on the specifications promised by the developer:The act imposes certain strict parameters and regulations on the promoters of project to ensure adherence to the deliverables promised to the buyers. This regulation, will demotivate real estate developers from making false claims and promises to entice buyers. The regulatory authorities will have to be presented at the time of the registration the specifications that the developer will provide to the buyer upon completion. Any deviation from what is promised and what is being delivered, shall put the developer under scanner, making him answerable to the regulatory authorities as well as the end buyer.
- Clear Definition of The Property area:For many years real estate developers cheated consumers by altering the concept of carpet area to suit their convenience. However, under the RERA Act 2017, the term carpet area has been defined in black and white. This brings about more clarity for the buyers to understand what is the size of homes they would be investing in. Carpet area definition under the act includes usable home spaces such as the kitchen and toilets, bringing about more clarity than what was earlier.
- Defining a Developer’s Liability and Responsibility:Under the RERA act, the liability of the developer towards structural defects and repairs has been extended to 5 years which earlier was 2 years. This regulation is likely to make the developers more responsible in every stage of project execution and careful towards the raw materials and engineering used in building projects.
- Speedy hearing and judgements:The RERA act, instructs the real estate appellate tribunals to clear out disputes and complaints within 60 days as against the earlier proposed date of 90 days. This would turn out to be a huge reform in protecting the consumer against malpractices. It will also instill greater confidence in the home buyers for the amount of monies they invest in their homes.
- Better check on Real Estate agents and brokers: While real estate brokers and agents are often an important link between developers and buyers, they tend to disappear from the scene at the time of a buyer’s complaint or redressal. The act imposes strict rules that the real estate agents and brokers need to abide by, failure of which shall entail them to punishment and heavy fines.
RERA Act: A Welcoming Move by Real Estate Developers
Although from a distance the RERA act seems to be weighing towards the consumer, creating a lot of buzz among real estate developers, there are most of the key players in the industry who call it a ‘welcoming move’ that will only add value to the industry. With investor confidence going up there is certainly more investment that will flow into the industry, which is a news to celebrate for the real estate developers.
While there are small time developers, operating the more unorganized real estate segment, who are unhappy with the reforms calling it biased towards the buyers and a harsh whip on the developers, the bigger players are completely in support of the bill as it is considered as a positive move to clean up and regulate the market better.
The builders are now gearing up to get registered under the act, the deadline of which is July 31st after which they will be proud enough to add on another certificate to their projects as ‘RERA compliant’ which only acts as a bigger confidence booster for the home buyers.
The Final Verdict
Although the act has been much delayed, its coming into force is best timed with the real estate slow down. Home buyers are postponing their buying decision until July, which only shows the confidence that the act has brought about in the investors.
While the implementation of the act would be immediate the governance effect of the same is a question of time. Till then it seems like a win-win situation for the developers and consumers who hope for a positive reform that will only add to the booming real estate industry in India.