1. RERA raring to protect homebuyers, but several states, UTs dilute norms to favour developers

RERA raring to protect homebuyers, but several states, UTs dilute norms to favour developers

The Real Estate (Regulation and Development) 2016 Act came into effect from May 1, 2017, as was originally stipulated a year ago. However, despite having adequate time, only 13 states and seven Union Territories have reportedly notified their rules so far.

By: | Updated: May 3, 2017 6:29 PM
Buyers have high expectations from RERA and expect that the regulation will bring transparency and accountability in the system.

The Real Estate (Regulation and Development) 2016 Act came into effect from May 1, 2017, as was originally stipulated a year ago. However, despite having adequate time, only 13 states and seven Union Territories have reportedly notified their rules so far. Not only this, most of the states who have done this are also said to have diluted the provisions of the Central law, which is certainly not in favour of homebuyers.

“While the Parliament passed the Model RERA Act, the actual passage of the state-level Act was left to the respective states. Real estate being a state subject, the Centre can only define a model code and the actual implementation is left to the wisdom of the states. Apparently what has happened in this case is that states have diluted these provisions in favour of builders. For example, certain states have kept the existing and ongoing projects outside the ambit of RERA, largely diluting its impact,” says Abhishek Lodhiya, Sr. Equity Research Analyst-Infrastructure, Capital Goods and Real Estate, Angel Broking.

According to Lodhiya, out of the 13 states and UTs that have so far notified the RERA rules, there has been some element of dilution in most of the states. For example, Gujarat has exempted all projects launched before November 2016 from the ambit of RERA. Projects that have not received completion certificates need to reapply under RERA. UP has exempted such real estate projects. Maharashtra has also given the RERA Authority the powers to withhold any document from public viewing, something not provided for in RERA.

“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,” says Sachin Sandhir, Global Managing Director – Emerging Business, RICS. 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.

A Colliers Research report also says that although the draft RERA rules, notified by the UP government, have the essence of the Real Estate Regulation & Development Act 2016, several clauses in the state regulation lack transparency. For instance, while the Act legislated by the Central government states that the promoter of a project will face up to three years of imprisonment or fine up to 10% of the total project cost for non-compliance, under the UP Act, several imprisonment clauses have been turned into compounding clauses (where money will be paid in lieu of actual punishment).

Similarly, under the Central Act there is provision for compulsory registration for projects admeasuring plot area more than 500 sq meters or 8 number of apartments, however in case of the UP Act while there is provision for compulsory registration, but there are no specifications on the minimum project size. As per the Central Act, developers will rectify any structural fault free of cost in case it is reported within five years of the date of possession. However, there is no clause regarding structural defaults in the UP Act.

According to media reports, Haryana has entirely left out the provisions that require builders to disclose the details of the sanctioned plan and layout.

Even Maharashtra is no exception. “Although Maharashtra’s draft RERA rules had covered all under-construction projects, irrespective of whether some of the individual towers/ phases received occupation certificate or not, it had diluted some other sections. After activists raised objections, the Maharashtra government decided to include these sections too. Similarly, buyers’ associations in both UP and Gujarat have been demanding that the states append missing sections in the state versions,” says Ramesh Nair, CEO & Country Head, JLL India.

What is worse, the Union Ministry of Housing and Urban Development (MoHUD) has reportedly tweaked the rules for Delhi to the advantage of developers. If it itself does so, then how can it expect the states to comply with the Model RERA Act?

Surabhi Arora, Senior Associate Director, Research, Colliers International India, says, “Although most of the states’ rules have the essence of the Real Estate Regulation & Development Act 2016, several clauses in the state regulation lack transparency. The clauses that lack clarity in various regulations are on issues such as inclusion of ongoing projects under RERA ambit, promotor’s liability on structural defaults, title issues and measures like imprisonment on noncompliance.”

Buyers have high expectations from RERA and expect that the regulation will bring transparency and accountability in the system. “The sentiments have already started improving and should drive the demand in the residential sector in the long run. However, dilution of various clauses may impact the effectiveness of the regulation adversely,” she says.

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