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RERA era begins: Why a twisted rule by one state could set a bad precedent for others

The Real Estate (Regulation and Development) Act or RERA is a very balanced Act and in its true form proposes to sweep in the single biggest reform in the real estate sector. It puts huge responsibilities on the authority to grant approvals and declines in a defined time-period.

However, the authority needs to manage the implementation well to avoid chaos in the industry that can run into a few quarters due to the massive nature of the changes proposed, says Manish Sinha, Head of QuikrHomes.

There are a few concerns related to the Act.

RERA, which proposes to to become a customer centric industry, fails to address the most pertinent existing problem of customers- the delayed projects -  as RERA rules being scripted by states like UP and Maharashtra cleverly kept ongoing projects out of the ambit of the law. Says Pradeep Aggarwal, Co – Founder & Chairman, Signature Global: “Apart from everything else that RERA proposes to reform, the one thing that will infuse buyer sentiments in the sector will be of timely deliveries.”



RERA law in the state of UP defines ongoing projects where completion certificate has not been issued but excludes a number of projects, affirms Colliers Research, by adding clauses where: The services have been handed over to the Local Authority for maintenance. Where common areas and facilities have been handed over to the Residents’ Welfare Association for maintenance. Where all development work is complete and sale/lease deeds of 60 percent of the apartments/plots have been executed. Where development work is complete and application for completion certificate has been submitted.

Besides, several more issues in UP’s RERA scripture are related to title, minimum project size not specified, ambiguity on the process to be adopted for remaining development work in the event of lapse or cancellation of the project. There is no clause regarding structural defaults. And as regards penalty for non compliance, several imprisonment clauses have been made into compounding clauses (where money is paid in lieu of actual punishment).

Here lies the danger of rules being twisted by one state and setting a bad example for others.

And that also explains why only 13 states have actually notified rules & regulations in the first place. RERA came into force on 1 May supposedly in favour of home buyers, but this new regime of stricter regulatory supervision cannot commence until the final draft rules are ready by all the states.  Do we take our laws seriously? If that were so, states such as Assam, Tripura, Karnataka, Tamil Nadu, Punjab, Himachal Pradesh, Mizoram, Jharkhand, Telangana, West Bengal and Chhattisgarh would not have missed drafting local RERA rules as per the deadline set by the government.

Uttar Pradesh has set forth certain exemptions to the applicability of the law to on-going projects, some of which are legally questionable, such as the use of a ‘partial completion certificate’ issued under the provisions of the Uttar Pradesh Apartment Ownership Act, 2013. Technically, this is what could be called a ‘dilution’ of the spirit of the law, something that other states may also be trying to do to protect the interests of developers – says Sachin Sandhir Global Managing Director – Emerging Business, RICS.

Besides, Sandhir says, the formal authority (Real Estate Regulatory Authority), which will implement the rules and regulations of the Act has not been constituted in most cases, so a developer who has to get his project approved – still does not know who to go to. If a developer faces a loss of revenue on account of such Authority not having been constituted in time, it will be interesting to see who would be held legally liable.

So far there is no indication that public authorities like Development Authorities and Housing Boards – which also develop real estate – have come up with a new compliance framework under this law.

It is possible that third party, below-the-radar soliciting for projects may continue such as marketing project through closed groups, thinks Sandhir.

Setting up the required “RERA infrastructure” such as the authority and the Appellate Tribunal as well as an online platform is likely to take at least 3 to 6 months, says Colliers Research. During this transition time, both real estate developers and agents are likely to face challenges in the short term as they need to comply with the new set of regulations.

It will take a while to get going and certain case studies to prove its effectiveness puts forth Gaurav Gupta, General Secretary, CREDAI – RNE. He says the teething problems in its implementation has to be carefully addressed by the government in a practical manner lest there is danger of strangulating the sector.

Also, providing data and information to customers for many new requirements will be a complex task for the authorities.

Yet, the law can be enforced proactively believes Sandhir, provided the existing local building control authorities keep an eye on the ongoing projects in their jurisdictions for onward transmission to the proposed Real Estate Regulatory Authority. In fact, such offices of local authorities can become collection points for the application itself and make the Real Estate Regulatory Authority’s job much simpler by collating the necessary information during the course of according approval to building plans, reducing both redundancy and time taken to process such an application. He has a few suggestions on how Sates should go about their duties.

What can the States  – which have notified the necessary regulations  – do now to achieve compliance with the law?

1. Appoint a competent official as the real estate regulator – preferably someone who has more than arm’s length distance from any promoter. Other person(s) sitting on the regulatory authority to judge a case must also comply to standards of independence and propriety. The rules and regulations are silent about what to do if the regulator (or any member on the authority’s adjudicatory panel) has any vested interest in any proposal placed before it.

2. Empowering the local authorities – such as those according approval to building plans – to act as a repository and conduit for new applications and to pass on the information pertaining to all existing real estate projects within their jurisdiction (which have not been issued a completion or occupancy certificate) to the regulator’s office. Pre-checks such as ascertaining the title of land, compliance to building rules, adherence to revenue code where applicable and clearances from other public agencies such as power distribution companies, water supply entities etc. can be ascertained at this stage itself, i.e. with the local authority itself – and is already part of the building plan approval process.

3. Develop a standard operating process for appraisal and disposal of cases that can be used by the regulator. This could cover for on-site inspection/ first hand inspection of projects.

Only by adhering to norms and regulations can the Act become truly functional in spirit in each state, and thereby grievances will be addressed properly and with a definite solution.

The twists to RERA rules will render it toothless. So of utmost importance is continuous supervising and monitoring the implementation now when the on-ground reality is taking shape.

Updated Date: May 04, 2017 13:08 PM

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