What does RERA really mean for you as a home buyer? How does it impact you? This article covers detailed aspects of what RERA is, what is the current status of RERA Act’s notification in various Indian states, ground impact created by RERA, expert comments on the same and the road ahead for Indian real estate with RERA in place. The article is constantly updated with new developments in RERA. You can bookmark for revisit.
Let us first understand what RERA is all about.
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What is RERA?
RERA or Real Estate(Regulation and Development) Act was passed by the Rajya Sabha on 10 March 2016 and by the Lok Sabha on 15 March 2016. The Act came into force on 1 May 2016 to regulate the still largely unregulated real estate sector. There has been a huge demand for such an Act thereby bringing in accountability and transparency into the real estate sector. With real estate being a state subject, many States have now framed rules and regulations for the smooth implementation of RERA.
RERA Notification Status for Indian States & their Websites
Below is the status of RERA in the various States across the country:
|Andaman & Nicobar Islands||http://www.tnrera.in/index.php|
|Dadra & Nagar Haveli||https://maharera.mahaonline.gov.in|
|Daman & Diu||https://maharera.mahaonline.gov.in/|
|NCT of Delhi||http://dda.org.in/rera/index.aspx|
Note: This table is constantly updated as more states launch/update their RERA websites.
The Bombay High Court decided on a grievance petition filed by various builders and promoters across the country challenging the constitutional validity of the RERA. In a relief to many buyers, the HC upheld the Act and said the Act shall very much include ongoing project within its purview. It also ruled that the Act shall apply prospectively and not retrospectively and did not contravene any Articles of the Indian Constitution.
A few key takeaways from the Act would be as follows thereby benefiting you as a home buyer:
1. Definition of ‘Carpet Area’
The Act brings out a clear definition of “carpet area” which means
“the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment”.
This means that only the area within the 4 walls of the apartment will be considered as carpet area. This brings clarity to the definition which was clearly lacking earlier. Also now buyers are only eligible to pay for the carpet area and not super built area as was the case earlier.
2. Registrations of Projects
Any new project to be launched by a builder/developer has to be registered under the State real estate regulatory authority. Any residential/commercial project with more than 8 units or more than 500 sqm has to registered. Thus any launch or advertisement of a new real estate project cannot be made unless such project is registered under RERA. It is advisable to our readers that this is the first point you should check while shortlisting real estate projects.
3. Redressal Mechanism
A common grievance in the real estate sector is the delay or even non completion of projects. Buyers previously therefore did not have any redressal mechanism apart from the regular legal framework. But RERA seeks to change this by imposing strict regulations on the developer to ensure projects are completed well within the stipulated time as promised to the buyer through their prospectus/ advertisements. The developer shall be liable to pay a total of 10% of the project cost as penalty and can face up to three years imprisonment in case of a delay in delivering the project.
At the same time even the builder has an option of approaching the regulatory authority in case of any issue with the buyer or due to default in payment by the buyer.
States like Maharashtra have even gone a step ahead and introduced a Conciliatory forum for allottees and promoters, thereby allowing matters to be settled expeditiously and hassle free. In a recent development, on 13th March 2018, the conciliation panel set up by MahaRERA settled 6 disputes between builders and warring buyers. The members of this panel consist of developers and social activists. The aim of this panel is to help settle disputes, before they even reach the real estate regulatory authority, thus saving time, money and effort of all parties at stake.
Image Source: TOI
Also Appellate Tribunals shall be set up that aim at resolving disputes between the builder and buyer within 120 days.
With the RERA courts already in motion, a look at the court’s approach towards erring builders has been more than satisfactory and brings in the much needed assurance. In certain cases, the courts have even ordered the refund of the initial deposit to the buyer and in some cases the courts have reprimanded the builders thereby ensuring the grievances of the buyers are met.
One order from the Karnataka RERA court dated January 18, 2018 is noteworthy wherein the builder “ Paranjape Windfields” had to reimburse the entire loan amount payable with interest to the complainant due to a breach as the carpet area was less than what was promised. The erring builder owed a total of 52 lakhs along with 18 lakhs as interest and tax amount.
4. Corpus Fund
Another grey area that RERA seeks to address is the common excuse put forward by developers to delay projects as lack of funds or in certain cases where the builder may divert funds from one project to another also leading to lack of funds. This issue has been addressed as RERA now mandates that developers put 70% of the money collected from potential buyers into a separate bank account thereby ensuring construction costs and land costs are met and projects are delivered as per schedule. This account shall serve as an escrow account and the amount to be withdrawn shall be in proportion to the completion of the project after being duly certified by an architect, chartered accountant and engineer to the same.
5. Quality of Construction
RERA has also ensured maintaining standards in quality of construction as the developer is now responsible for repairing structural defects in a project upto a time frame of 5 years and his obligation does not merely end with delivery of a said project. On the same note, do ensure you go through this checklist of bad projects for investment.
The regulatory authorities set up under the RERA Act shall now furnish all information pertaining to the developer, his financials, litigations if any, prospectus/advertisement of the projects along with complete details of the apartments/ flats etc thereby ensuring transparency for the buyer which was sadly lacking in the pre- RERA days. Some of the State RERA websites have already implemented this while some States like Karnataka are yet to implement it as we can see from the below 2 examples from the MahaRera website and UPRera website.
Maha RERA: Project – Lodha Amara
UP RERA – Project – Supertech Czar
RERA and its impact on the Real Estate Market
According to a Cushman and Wakefield report, currently developers are launching fewer new projects, as they straddle with an environment of high inventory, weak demand and are focused on ensuring new projects are in compliance with regulatory changes like Real Estate Regulatory Authority (RERA) and GST.
Mr. Senthil Kumar, the Manager of Walls and Acres, a real estate brokerage company while talking to the Get Me Roof team feels that the real estate market has grown leaps and bounds over the years, but property buyers have always viewed the industry with skepticism. However this dynamic has changed due to RERA as there will be complete transparency of transactions which in turn will boost end user confidence.A few questions were posed to him by our team –
1. So how did the real estate sector take the impact of the implementation of RERA?
The real estate sector he says, did feel the pinch in the initial months post implementation of RERA. There was a slump as builders and agents alike had to become fully compliant with the Act and take necessary corrective measures. But in the times to come RERA has started to act like a guidebook for promoters and real estate agent alike. Thus RERA has managed to define boundaries by laying down the do’s and don’ts.
2. How do you think RERA will change the real estate market?
RERA he feels has also to an extent helped in shedding positive light on the real estate market in the media. The media was rife with news reports of delays/non completion of projects leading to a sense of anxiety among potential buyers. This scene is set to change with the advent of RERA as promoters now have to be accountable for their acts or face penalties in case of any omissions on their part.
3. What are some changes that you wish to see in the RERA?
He believes that RERA is indeed the right step in the right direction to instill buyer confidence. He however felt, that to further clarify things, the government should also make available to the public, documents that have been submitted by developers to the regulatory authority to get project approval as is the case in many State websites.
If one were to look at the RERA Karnataka website and visit the project approved column, we find only 3 columns pertaining to Registration no, Name of the Promoter and lastly Name of the project. Another column stating the documents that have been submitted along with the document number, if added can prove beneficial to the buyer. To further clarify things, below is the relevant screenshot from the RERA Karnataka website:
He hopes the government in the long run shall address this and make the necessary changes needed to further strengthen RERA as has been done by other State RERA websites.
4. Is RERA really proving to be beneficial for home buyers?
Originally implemented to ensure transparency in the real estate industry, RERA is yet to prove itself as an efficient body that prevents malpractices. RERA, consisting of three members and a few adjudication officers for a whole state, lacks the workforce to review 19,000 registrations that were granted by the body in the state of Tamil Nadu. Check some of the cases where legal relief under RERA has been granted.
Here’s an incident witnessed in the state of Karnataka.
On 17 November 2018, a crowd of 100 people gathered at the construction site of a residential project on Sarjapur Road, Karnataka, to stage a silent protest against a renowned builder for delaying the hand- over of their flats that they had booked in this ongoing construction project.
This luxurious 950-house residential project commenced in 2012 and was promised to be completed by June 2016, or latest by December 2016, keeping in mind a six-month grace period. But unfortunately, it has been two years now since the handover was promised and yet the buyers are waiting to get the possession of their flats in this under construction project.
So many of them had purchased these flats on loans, for which the repayment has already begun. Sunil Kumar Gupta, who has purchased an apartment in this project feels absolutely cheated. “We are spending around Rs 75,000 per month on paying EMI and rent on the house that we are currently living in.”, he shared with ET as per a recent report.
The silent protest was not just against the builder, but against the real estate regulator too. The real estate regulator was laid-back to acknowledge their complaints. Around 75 home buyers in March ’19, launched separate complaints with the Karnataka Real Estate Regulatory Authority against the builder claiming that the due date for the handover of the project was long gone.
They also complained about the reduction in floor area than what was promised. The buyers claim that it has been eight months since reaching out to RERA, but there seem to be no positive outcome or benefit from it.
On December 31, 2018 the government established a committee to aide and guide the Real Estate Regulation and Development Act. The main purpose of forming this committee is to eliminate all problems that the Act faces and in turn, recommend apt solutions to all issues.
This decision to form a committee which will be headed by Shiv Das Meena – the joint secretary of union housing and urban affairs, was implemented after four workshops were held. These workshops received important inputs regarding the right enforcement of the RERA Act from all stakeholders including home buyers.
As on 12th March 2018, RERA Karnataka is publishing website records of approved projects for public viewing as we can see from the below screenshots.
Source: RERA Karnataka
Statewise RERA Update
- Andhra Pradesh – As per the latest notification, 328 projects and 48 agents have been registered by now and the online portal is functioning smoothly. Until now, the APRERA has denied 20 project registrations. Above all, it has been praised by the government with an award for its excellent online service. However out of 95 complaints received, only a total of six have been resolved.
- Assam – The rules regarding RERA have been currently notified in this state, where an interim regulator has also been appointed. Housing and Urban Affairs Minister- Hardeep Puri has firmly supported the RERA Act in all North Eastern states which endeavors to create transparency and protect the interests of the homebuyers.
- Bihar – With over 440 project applications received, 246 projects and 95 agents registered, 74 notices issued out of which 16 complaints are resolved – the online portal of Bihar is operating incredibly well. The appointed chairman of Bihar RERA, Shri Afzal Amanullah has penalized around 51 builders for wrongly promoting, advertising, and selling their ongoing projects without being registered. An amount of Rs 10 lakh has been fined to each builder for violating the law.
- Chhattisgarh – Slowly but steadily, the Chhattisgarh RERA is picking up momentum. Since its launch in June 2018, it has around 710 registered developers, 980 registered projects, 363 registered agents and a phenomenal number of 228 complaints resolved.
- Goa – Out of the many states, the performance of Goa RERA is extremely poor. With only a handful of 383 projects and 147 agents registered the Goa RERA has asked Maharashtra RERA to manage its complaints on behalf of the state regulator. The Maharashtra government is now liable to pass a correct decision of the 20 cases filed under the Goa tribunal.
- Gujarat – In May 2019, Gujarat RERA has successfully registered 2,687 residential projects and 1038 affordable housing projects. With over 5,300 projects registered under the act, it is known as the state with the second-highest registrations with real estate. Gujarat RERA had launched a one-time voluntary compliance scheme for all real estate developers from May 1, 2019, to June 7, 2019, for all who hadn’t updated their quarterly progress reports for the last two quarters. Failure to which they were subjected to trial under the Act.
- Haryana – Under Haryana RERA 301 projects and 714 agents have been registered by now. The pace of registration is noticed adequate. The state has received a whopping 4785 complaints out of which 55% of the complaints i.e. 2718 complaints were disposed of. The Haryana state chairman K. K. Khandelwal had mentioned that most of the complaints were based on delaying of projects or pending refunds from builders.
For which, all real estate developers have been heavily penalized who have not achieved the timeline of the project delivery. A further downside to this situation is that many homebuyers claim that the regulatory authority has been partial and even supported the builders, in turn delaying the complaint redressal.
- Himachal Pradesh – Himachal Pradesh RERA is moving at a moderate pace with only 29 projects and 26 agents registered. Further, the Chairman of RERA authority is yet to be assigned.
- Karnataka – Karnataka RERA is performing well where over 3,158 projects and 1,724 agents have smoothly registered so far. In addition, the online portal is also well-maintained. However, copies of online complaints are not found which is the only downside of Karnataka RERA. The Karnataka RERA website has recently updated that 948 ongoing residential projects have not been successful to complete their projects on the timeline mentioned at the time of registration.
Since, the RERA authority is responsible to look after such matters and provide justice to homebuyers, the Chairman of this regulatory body – Mr. Kumble has promised to send notices to all builders who failed to meet the registered deadlines. However, as of February 2019, over 1000 realty developers have dodged the notice from the RERA authority. Activists who are fighting for the effective implementation of RERA have questioned the authority for not initiating action against the unregistered projects and for following a wait and watch policy.
- Kerala – The current scenario for RERA in Kerala does not seem very bright. With the state RERA repealed and Regulatory authority abolished, new RERA rules are to be notified soon.
- Madhya Pradesh – Claiming to be fully functional, 2,176 projects and 541 agents are also registered here. Additionally, MP’s RERA website claims to dispose of 1,845 complaints out of 2,200 that it received.
- Maharashtra – When compared to other states, Maharashtra RERA is currently maintaining a lead with the highest registrations of the projects. As per the records, 79% of the real estate projects 99.7% of the real estate agents in Maharashtra are registered under RERA. The Maharashtra RERA Website also claims addressing 64% of complaints received. With over 20,569 projects and 19,726 agents registered, Maharashtra RERA truly sets an example for other states. What’s more, is that Maharashtra RERA is the first to hear complaints of homebuyers through online video conferencing.
This initiative promises to reduce the travel time of all complainants and received warm support by receiving around 12 complaints on the first day itself. On the contrary, a recent case reports over 100 cases against builder DS Kulkarni have been pending since a year. While according to section 71/2 of the RERA Act, the authorities are bound to deliver the judgement in 60 days from the day the complaint is filed. However, the RERA court is yet to initiate an action in the cases filed in 2017.
- Odisha – A total of 260 projects and 35 agents have been registered. The authority has also received over 288 complaints which are currently under investigation.
- Punjab – Punjab’s RERA online portal is fully-functional with 678 projects and 1,461 agents are registered so far. The state has also resolved an enormous number of 320 complaints.
- Rajasthan – The Rajasthan RERA has registered 961 projects and 868 agents so far and in 2019. In spite of the establishment of an appellate tribunal, a total of only 6 complaints have been resolved.
- Tamil Nadu – The state of Tamil Nadu takes pride in having the fourth-highest registration for the projects and agents under RERA. 979 project registrations and 501 agents have been registered so far out of which 20 have been rejected.
- Uttarakhand – The online portal of RERA for Uttarakhand is functioning well with over 235 projects and 246 agents have been registered. However, the rejection of registration applications is not available online. The authority has also introduced a complaint helpline number 0135-2719500 to keep malpractices in check.
- Uttar Pradesh – RERA got a well-functioned online web portal for Uttar Pradesh where over 1,422 developers and 2,612 projects registered. When it comes to complaints, it received over 12,000 complaints that have been received out of which, 4,600 have been resolved. Further, three benches have also been established in order to address complaints without delay. The Uttar Pradesh RERA is also planning to take over the abandoned projects for the welfare of home buyers.
- West Bengal – Considering the disputes between RERA and Housing Industry Regulatory Authority (HIRA), it took a while for RERA rules to arrive in West Bengal. As of now, the rules have been notified here, however, an interim regulator is not appointed. As of 2019, a total of 320 projects have been registered.
What Does RERA Mean for You as a Home Buyer?
A critical analysis of the Act shows it tilting in favor of homebuyers who have been long in the dock. It allows the home buyer to make an informed decision while investing in a particular project.
A home buyer can now get accessible information pertaining to any new project that he may want to invest in. Details related to not only the project shall be available to a potential buyer but even information such previous track record of the developers, information pertaining to their financials shall have to be disclosed on the website once the developers get registered.
With clear definitions of ‘promoter’, ‘carpet area’ etc and also with the mandatory registration of real estate agents, potential buyers can be more confident in investing their hard-earned money in any new project.
- Checks and Balances
The real estate sector had been plagued with certain malpractices and their remedies have been well addressed by the Act. Non completion of projects on time, announcement and advertisement of projects without taking proper approvals, subsequent changes in plans or specifications other than what was promised to the buyer are issues that have been taken care of in the Act. Proper checks and balances have been put in place by the Act thereby boosting consumer confidence.
- Renewed confidence
A potential home buyer could now with greater confidence and surety invest in under- construction projects as opposed to ready to move in projects. The reason most buyers preferred the earlier was to avoid legal hassles and litigation costs in case of any delays in deliverance of a project or in extreme cases even non-completion. With RERA ensuring timely delivery of projects and with a sound dispute redressal mechanism including penalties for delays in place, buyers can be at ease in investing in their dream projects.
- Credibility of developers
At the same time developers are also cautious in ensuring that they are compliant with the Act. Since the Act requires that the proceedings of the sale be deposited in a separate bank account to ensure timely completion of projects such a move shall boost the credibility of the developers in the long run. Developers are also taking reasonable care in uploading the documents pertaining to the project as once uploaded on the regulatory websites, such documents cannot be deleted or taken down though additional documents may be uploaded for the benefit of the buyers.
However since the Act brings within its ambit only projects with more than 8 units or more than 500 sqm, projects less than 8 units need not be RERA compliant nor do they have to make any disclosures. This is a small loophole which could well be exploited in the future as small time developers would prefer to opt for projects with less than 8 units without being scrutinized under RERA. In such cases potential buyers should proceed with caution and ensure a thorough background check is done.
RERA though still being in the stages of infancy, has been found to have far reaching consequences for the real estate sector in a short span of time. The trend started by builders to commence multiple projects simultaneously has been on the decline thereby promoters now focus on a single project and ensure timely delivery of the same.
Many new launches have also been put on hold and the aim now is the completion of undergoing projects. One can safely say that a RERA like Act has been long overdue to reign in the real estate sector to ensure transparency and boost confidence among end users. With numerous examples of project delays, plan violations, lack of necessary approvals in commencement of a project, the Act comes as a breather for many current or future home buyers.