It has been more than a year since the Real Estate Regulatory Act (RERA) came into effect (May 1, 2017). It was aimed at ensuring accountability and infusing transparency and uniformity in practices prevalent in the real estate sector by bringing both ongoing and new projects under its purview.

One of the critical aspects of the act was the setting up of state-level regulatory authorities, with which projects would be registered. The states were also required to put in place online RERA portals which provided the public access to detailed project-level information.
The registered projects were required to be updated on a quarterly basis in terms of progress and sales information.

The rate of implementation of the act has been slow, but steady. Already 21 states have notified the RERA rules, and 13 have an active online portal, according to a research by real estate consultancy firm CBRE.

In Karnataka, in the absence of a permanent regulatory authority, the state government has appointed the principal secretary in the state department of housing as the interim authority. It has also appointed a RERA secretary. So far, the state has witnessed registration of 1,677 projects. The website enables the public to access all the required information, including projects under investigation. Its search feature is extremely dynamic, and it also has a complaints tracker page.

Dilutions of the act

While several states are well on the path of implementing RERA, continued dilutions of key provisions of the central act by several states has become a problem area. These dilutions include exempting a majority of under-construction projects from RERA’s purview as well as easing penalties awarded to builders in case they do not comply with the act. As a result, a number of petitions challenging the validity of RERA were filed across various high courts throughout the year.

At the behest of the central government in September 2017, the Supreme Court transferred all pending cases to the Bombay High Court to avoid multiplicity on the issue. In December 2017, a ruling by the Bombay High Court upheld the following provisions of RERA:

RERA provisions will apply to all ongoing projects

The court dismissed the excessive interest rate argument (in case of completion delays) and ruled that it is fair and imperative to protect home buyers.

However, the high court granted relief to developers on the following points: In exceptional circumstances, if the developer fails to deliver, the RERA authority has powers to provide an extension to the project without a penalty. The RERA appellate tribunal should be headed by a judicial officer; a majority of the tribunal members must also be officers or members of the judiciary.

While the implementation of RERA did create disruptions for residential real estate, in the long run, the act has helped greatly in resolving issues related to accountability, transparency and investor confidence.

It has also revived end-user sentiment to a certain extent, which is expected to result in a more resilient and end-user-driven demand in the residential segment in the near future. However, this can only be achieved if the act is implemented in its spirit. The ruling by the Bombay High Court is critical as it tries to ensure that states do not dilute the act by making exclusions.

Moreover, RERA’s implementation needs to pick up pace as it could lead to a quicker revival of residential real estate. Already, developers in most states have realised that RERA is now a definite reality. It is now only a matter of time that the remaining states will implement the act, bringing much-needed uniformity and transparency to the Indian real estate sector, CBRE said.

“For the first time, the end user had easy access to property-related data and information, creating a transparent interface. Consumer interest was on the rise and this translated into an increase in bookings and queries at the developer’s end. The strong latent demand in the last two quarters of FY18 is proof of the same,” Ashish R Puravankara, Managing Director, Puravankara said.

He further added, as for the developer fraternity, RERA was a timely move which brought with it a much needed regulator in place, paving the path towards the growth and development of the industry. Of course, there is much more to be done collectively in the real estate community, but RERA has set the tone for the future – transparency and accountability.

RERA brought with it the consolidation of the industry just further driving the accountability piece but also making it customer-centric.

For PE investors, this is a positive sign, along with a system which has measurable risk defined. With states across the country gradually aligning to the asks of RERA, this will be beneficial to all the key stakeholders viz. the consumer, developer and investor. In the days to come, we will witness the evolution of the Indian real estate sector into a transparent, organised and balanced system.

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