While the advent of any new legislation brings with itself its own set of challenges in respect of enforcement and application, the onset of the Real Estate (Regulation and Development) Act, 2016 (RERA) has been instrumental in bringing enhanced transparency, accountability of developers, instilling significant comfort and confidence in home buyers and reshaping the landscape of the Indian real estate industry. Prior to commencement of RERA, there was not only limited scope of dispute resolution for flat buyers but also a lack of control and regulation of finances amongst promoters which led to exploitation at the cost of allottees.
Promoters under the RERA regime are now prohibited from advertising, marketing, booking or selling or offering for sale or inviting any person to purchase any apartment, plot, etc. in a project without procuring registration from the State level authority established for each State (RERA Authorities). RERA Authorities have also been granted significant control and regulation in respect of registration and validity of projects and promoters are mandated to ensure all compliances are in place. For instance, obtaining commencement certificate, sanctioned plans, proforma of allotment letter and agreement for sale, etc., before RERA registration for a project may be granted to such promoter.
RERA has also mandated quarterly compliances to be adhered to by the promoters including updating details of project costs , other promoters in the project, encumbrances and litigations, percentage of project work completion, sold and unsold inventory from time to time and failure to comply may attract penal action under RERA. It is pertinent to note that while existing encumbrances on a project property may be obtained by conducting a search in the office of the sub-registrar of assurances of relevant jurisdiction, this is a lesser-known fact to the common man. MahaRERA has in fact recently mandated promoters to display QR codes in project promotions and advertisements.
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RERA has been notably active in ensuring all details pertaining to a project are made available in the public domain and made it easily accessible to home buyers. Aforesaid steps have ensured that developers are aligned with consumer centric norms, fostering a culture of compliance and accountable business practice while at the same time instilling confidence in home buyers in making an informed decision while booking flats and monitoring the progress of construction of real estate projects from time to time.
RERA has also laid significant emphasis on timely project completion failing which promoters are liable to pay interest, compensation or refund, as applicable, to allottees which has strengthened the faith of allottees in the legislation. RERA authorities have also been evolving with each passing day and have been monumental in ensuring speedy dispute redressal mechanism.
One of the noteworthy transformations in the real estate terrain brought about under RERA has been the mandatory bifurcation of 70% of project receivables from allottees under the project into a separate escrow account which is to be used strictly for construction purposes. This has been a landmark step towards prevention of diversion of funds and ensuring the amounts collected from allottees are used for intended purposes only. Allottees have also drawn comfort towards the legislation as unilateral changes to sanctioned plans, layout plans, specifications, nature of fixtures, fittings, etc. of flats booked by allottees are no longer permitted under RERA without the previous consent of allottees.
It is also pertinent to note that transfer of majority rights and liabilities by promoters in a real estate project to a third party is not permitted without obtaining prior written consent from the relevant RERA Authority and two-third allottees in the project which is an empowering tool in the hands of allottees towards deeper involvement in the decision-making process of change of promoter in relation to the project.
It can be seen from the numerous practices mandated by RERA Authorities from time to time that the intention of RERA is to empower flat buyers at the grassroots level and with the promoters increasingly adapting to comply with legislative requirements, RERA has fundamentally transformed the conception and execution of projects. While the introduction of RERA has attempted to establish a compliance based homogenized structure for the welfare of allottees as well as the promoters which in turn has bolstered the faith of banks and financial institutions in providing construction finance and has nurtured the real estate ecosystem, the execution of orders passed by RERA Authorities and consequent enforcement of recovery warrants against promoters remains to be leveraged upon.
(By Bhoumick Vaidya, Partner, and Sona Phogaat, Associate, Shardul Amarchand Mangaldas & Co. Views are personal)