Various measures have been taken by the Government to protect the interest of homebuyers from time to time and RERA ensures real estate sector operates in a transparent and an accountable manner. As per the latest information available with the Ministry, 32 States/ Union Territories (UTs) have set up the Real Estate Regulatory Authority under Real Estate (Regulation & Development) Act, 2016 (RERA).
A few of the important provisions of the act to protect the homebuyers include Section 4 of RERA that provides for compulsory deposit of seventy percent of amount realised for real estate project from allottees in a separate bank account to cover the cost of construction and land cost. RERA also, interalia, makes the promoter liable for refund of amount, with interest and compensation, in case developer fails to complete or is unable to give possession of apartment, plot, building to homebuyer; as per the terms of the agreement for sale.
Dhaval Ajmera- Director, Ajmera Realty Infra India Ltd & Secretary - CREDAI-MCHI, sharing the journey of RERA elaborated, "The Real Estate Regulation and Development Act (RERA) is a legislation that was enacted in India in 2016 with the aim of regulating the real estate sector and protecting the interests of home buyers. The idea of a legislation to regulate the real estate sector in India was first proposed in the late 1990s. However, it took nearly two decades for the legislation to be passed. Enactment: RERA was enacted in 2016 and came into effect on May 1, 2017. The implementation of RERA was a gradual process, with different states and union territories issuing their own rules and regulations based on the Act. The implementation of RERA faced several challenges, including resistance from developers and delays in the establishment of regulatory authorities and appellate tribunals. Despite these challenges, RERA has had a positive impact on the real estate sector in India. It has helped increase transparency and protect the interests of home buyers.”
Parveen Jain, CMD, Tulip Infratech & Chairman, NAREDCO said, “RERA is the Real Estate Regulatory Authority which brings in more transparency, reliability and accountability between the buyers and developers. RERA addresses the various issues and problems faced by the buyers and fixes accountability and provides solutions in case of delay in projects or other matters. Due to RERA, now the buyers are not left hopeless in case of delay or incompletion of projects as RERA provides for redressal of disputes. RERA regulates the real estate sector, protects the interests of the buyers and provides solutions in various aspects, situations, problems and issues which may occur. Due to the enhanced transparency and accountability, the relationship between the buyers and developers is improving in terms of trust, faith and confidence if the projects are delivered on time giving the Clients’ interests as the top priority which brings laurels to the developer’s brand as well and brings in good name for the Real estate sector also as it becomes more organized.”
As per Sarthak Bhansali, Partner, S S Bhansali & Co LLP, “Over half a decade has passed since the implementation of the Real Estate (Regulation &
Development) Act, 2016 in May 2017 and the state-wise implementation of the Act has been, to put it mildly, at best - patchy. Of the 36 States and Union Territories, 32 states have set up the Real Estate Regulatory Authority with West Bengal being the latest to join the fray by setting up the Authority in December 2022. Some states like Maharashtra have registered over 38000 projects, while states like Odisha have managed to register just about 774 projects. A total of over 1 lac complaints have been disposed-off by the Authorities across the country. While the state of implementation may vary across the nation, there is no denying the deep impact the Act and the Authorities have had on the real estate sector.”
Advocate and RERA Consultant, Harshit Batra, Founder, Harshit Batra & Associates added, “RERA has been at the forefront of the real estate industry ever since its inception. With every passing day, we witness peculiar circumstances that call for action and give space for amelioration. There is no doubt that there exists disparity between a buyer and a developer, however, what remains common is that neither of them desires litigation.”
Dr. Vijay Satbir Singh IAS (Rt.), Former Additional Chief Secretary, Government of Maharashtra, Former Acting Chairperson, MahaRERA, explained, “RERA has evidently brought transparency and confidence into the real estate sector. However, the issues in implementation as well as the resolutions to the homebuyer’s challenges remain. Certainly, there are some teething issues in the implementation. Many RERA authorities do not have adequate staff to hear and dispose of the applications for implementation of the orders. They are also dependent on the revenue staff for recovery of money including penalties as arrears of land revenue. Many a times, there is lack of coordination with the government agencies.
ACCOUNTABILITY FROM ALL STAKEHOLDERS
RERA is not only a regulator but also a facilitator of the real estate sector. It has introduced transparency, accountability, efficiency and fiscal discipline in the sector and helped to restore the trust and confidence of home buyers. Timely completion of the projects and protection of the consumer are two important broad objectives of the Act.
As per Dhaval Ajmera, “RERA requires developers to deliver properties on time, as per the agreed-upon schedule. This helps ensure that home buyers do not have to wait indefinitely for possession of their properties. It also requires developers to disclose all relevant information about a project, including the cost of the project, the status of the project, and any changes made to the original plans. This helps protect home buyers against fraud and misrepresentation by developers. RERA has established real estate regulatory authorities and appellate tribunals to resolve disputes between developers and home buyers. This provides a mechanism for home buyers to seek redress if they feel that their rights have been violated by a developer. It also allows for the cancellation of a project if the developer does not adhere to the requirements of the legislation, such as delivering properties on time or disclosing all relevant information about the project. This helps protect the interests of home buyers in the event that a project is not completed or delivered as promised.”
He further added, “RERA also keeps the real estate developers in check. Under RERA, developers are required to register their projects with the relevant regulatory authority and disclose all relevant information about the project, such as the cost of the project, the status of the project, and any changes made to the original plans. RERA also requires developers to adhere to certain standards and requirements, such as delivering properties on time and adhering to approved plans as also offering a dispute resolution mechanism through appellate tribunals.”
Dr. Vijay Satbir Singh elaborated, “The Authority protects the interest of all stakeholders in real estate including the developers, consumers and agents and takes action to have their grievances redressed. It also makes suitable recommendations to the government to promote the real estate sector and encourage investments for that.
In this way, the authority endeavours to promote healthy and sustainable development of the real estate.
RERA authority should ensure timely compliances by the developer’s right from the time a project is registered till it gets completed. Action must be taken against those who indulge in malpractices or commit financial irregularities. Forensic audit can help in serious matters. Similarly, anybody who defaults in making payments should be penalised accordingly to the provisions of Act. All the grievances of the stakeholders should be addressed in a timely manner. The state government should also consult RERA authority while formulating policies relating to the real estate. “
Apart from buyer and developers, Harshit Batra spoke about other agencies that should be made accountable under RERA. He said, “For instance, banks/ financial institutions pay a pertinent role in the development of a real estate project. However, the Act fails to incorporate them as a stakeholder and their rights and obligations have remained unrecognized. While a tri-partite agreement is executed between the bank, allottee, and the promoter; RERA should get powers to issue orders against the bank in the limited aspect of builder-buyer relationship. This creates greater accountability as the RBI guidelines on this aspect are advisories in nature and do not create obligations. RERA can take strides in this aspect to fill this gap.
Furthermore, section 13 of the Act implies the execution of a builder buyer agreement, however, there is no provision for execution of any agreement/written understanding between the real estate agent and the allottee which leaves room for a number of fraudulent activities. For ease of regulation, and standardization, a draft tripartite agreement amongst the Builder, the Allottee, and the Real estate agent can also be introduced to create consensus ad idem between the parties qua the obligations of the real estate agents.”
THE PROS & CONS
RERA is a great move in the right direction and there is no doubt that the establishment of a regulatory body has boosted the confidence of the real estate buyers. What’s required now is a close watch on each stakeholder and an efficient implementation of the Act without diluting its sole purpose of enabling the growth of real estate as a sector.
Sarthak Bhansali concurred, “In the past 5 years, the RERA Authorities have regulated the developers by checking fund diversion, ensuring proper documentation, requiring the consent of allottees in case of revisions in plans, enforcing strict timelines for the completion of projects, and ensuring a smooth handover of the projects on completion. The Authorities on their website have also provided authenticated seamless information like project-wise plans, carpet area details, inventory bookings, land titles, and developers’ information thereby boosting the confidence of the investors and allottees. The Gujarat RERA as an example has provided a grid of inventory where each unit can be verified as either booked or unbooked along with masked names of the allottee enabling transparency in dealings and restricting double booking of inventories by miscreant developers.”
Parveen Jain said, “Albeit RERA is already doing well as a regulatory authority to bring accountability from all stakeholders, but times keep changing as we have seen in the pandemic era of two years in which ground realities keep changing and new unforeseen issues and problems keep emerging and also in terms of issues like climate change. RERA may also look into the changing ground realities and do whatever it can and direct all stakeholders to be prepared to tackle any kind of unforeseen eventuality and to find ways to provide more sustainable infrastructure, buildings and pollution free environment for a healthy, stress free living.”
Dhaval Ajmera sharing the downside stated, “Developers may incur additional compliance costs in order to adhere to the requirements of RERA. This could lead to an increase in the cost of property development and potentially, the cost of properties for home buyers. Moreover, RERA’s dispute resolution mechanism through the establishment of real estate regulatory authorities and appellate tribunals can be lengthy and may not be efficient in resolving disputes in a timely manner. In addition, RERA only applies to certain types of real estate projects, such as those that involve the sale of more than four units or are larger than 500 square meters. This means that small projects and those that do not involve the sale of units may not be covered by RERA.”
Harshit Batra agreed, “As a legal representative to a number of stakeholders, I have seen cases where there exists a scope for settlement or compromise and calls for a need for sensitive conciliation which is not usually possible without a formal channel. The solution to this is incorporation of a hybrid module similar to Med-Arb-Med. Presently, RERA promotes amicable conciliation, however, in my opinion, if such conciliatory practices are made firstly, before the filing of the reply by the opposite party and secondly, after the pronouncement of the order, more settlement of disputes can result.”
Dr. Vijay Satbir Singh shared his view, “In the case of stalled projects, RERA can be a facilitator to bring them to completion. These projects should be analysed on case to case to case basis and action be taken to address the problems being faced by the developers. If necessary, RERA authority can allow the association of allottees to take over and complete the project under Section 8 of the Act. The promoter of the project can also be changed. The authority can also take the help of government agencies for this purpose. For the projects facing financial distress, public or private funding can be made available.
ROAD AHEAD FOR RERA & REAL ESTATE
While developers are more mindful of the project timelines and in ensuring timely completion, the need of the hour is to ensure even the stalled projects reach fruition. Sharing his views, Harshit Batra stated, “There are a number of stalled projects which have caused grievances to thousands of allottees. Measures can also be taken by the Authority under section 32(d) to increase the financial assistance to affordable housing segment. In some cases, funds through the SWAMIH Investment funds are also infused to ensure the completion of the real estate. The main objective of RERA is to protect the stakeholders and to enhance the development of the real estate industry in the most effective and efficient manner. It is not novel that the enhancement of the industry and the completion of the development is not only a need for the allottees but also for the growth of the country at large. RERA provides for the constitution of funds under section 75 of the Act which can be used for, inter alia, the expenses of the Authority in connection with the discharge of its functions and for the purposes of this Act, one of which is to strengthen the sector. Moreover, RERA is also involved in the development of the project through its necessary compliances of maintenance of separate bank accounts, mandatory registration of ongoing projects, submission of quarterly progress reports etc.”
Sarthak Bhansali was of the opinion that while Authorities have tried to complete the delayed/stalled projects with their limited powers and resources by instituting forensic audits and appointing custodians, the main challenge lies where insolvency proceedings are initiated against the developers where a moratorium kicks in for all the orders passed thereby denying relief to allottees. “To safeguard the interest of the allottee, changes by the legislators shall be required to be made in the Insolvency & Bankruptcy Code where a project may be carved out of the company and handed over to the state RERA Authority for completion from the funds safeguarded and earmarked for completion of the project,” he said.
Dr. Vijay Satbir Singh concluded, “RERA provides a level playing field for all stakeholders. Many disputes can be resolved through the mechanism of conciliation. Some RERA authorities have established conciliation forums which provide alternative dispute resolution mechanisms for amicable settlement of disputes. The conciliators hear the parties and settle the disputes through the process of mediation. This results in a solution which is acceptable to the litigants. This has helped to end the unnecessary litigations and promote healthy relationship between the buyers and developers.”
The legislators had envisaged RERA Authorities to act as regulators and facilitators in the development of the real estate sector, it is clear that in the short 5 years of their existence a lot has been achieved toward the regulatory framework and a lot more is left wanting in development framework of the sector.
"AN ACT TO ESTABLISH THE REAL ESTATE REGULATORY AUTHORITY FOR REGULATION AND PROMOTION OF THE REAL ESTATE SECTOR," READS THE PREAMBLE OF THE RERA ACT. LEGISLATORS MADE IT ABUNDANTLY CLEAR THAT THE RERA AUTHORITY WAS ESTABLISHED NOT ONLY TO REGULATE BUT ALSO TO PROMOTE AND DEVELOP THE REAL ESTATE SECTOR, JUST LIKE SEBI WAS ESTABLISHED TO REGULATE AND DEVELOP THE SECURITIES MARKET.
“RERA AUTHORITIES SHOULD BE GIVEN ADEQUATE STAFF TO EXPEDITE THE IMPLEMENTATION OF ORDERS UNDER THE PROVISIONS OF THE ACT. IT’S ALSO NECESSARY TO HAVE A MECHANISM IN PLACE TO IMPLEMENT THE QUASI-JUDICIAL ORDERS ISSUED BY THE AUTHORITY LIKE THE RECOVERY OF MONEY FROM THE DEFAULTERS AS ARREARS OF LAND REVENUE. CLOSE COORDINATION WITH THE REVENUE OFFICIALS AT ALL LEVELS CAN ALSO BE VERY HELPFUL FOR THIS PURPOSE. THE PROVISIONS OF THE ACT SHOULD ALSO BE MADE MORE STRINGENT TO SPEED UP THE IMPLEMENTATION. PROSECUTION OF THE DEFAULTERS WHO DON’T COMPLY CAN BE VERY HELPFUL IN THIS REGARD.” DR. VIJAY SATBIR SINGH
“OVERALL, THE AIM OF RERA IS TO INCREASE TRANSPARENCY AND PROTECT THE INTERESTS OF HOME BUYERS IN THE REAL ESTATE SECTOR. SOME WAYS IN WHICH RERA IS EMPOWERING THE HOMEBUYERS IS BY ENSURING TIMELY DELIVERY OF PROPERTIES, PROTECTING AGAINST FRAUD AND MISREPRESENTATION, PROVIDING A MECHANISM FOR DISPUTE RESOLUTION AND BY ALLOWING FOR CANCELLATION OF PROJECTS.” DHAVAL AJMERA
“IN CASE OF STALLED PROJECTS, RERA CAN BE A FACILITATOR BETWEEN THE BUYERS AND BUILDERS BY LOOKING INTO THE SPECIFIC SITUATION, SCENARIO AND REASONS IN WHICH RERA CAN DIRECT THE BUILDER TO COMPLETE THE PROJECT, IF THE BUILDER IS UNABLE TO DO SO THEN RERA CAN DIRECT SOME OTHER AGENCY TO COMPLETE THE PROJECT, IF FOR SOME REASON, THE STALLED PROJECT CANNOT BE PROCEEDED FURTHER OR COMPLETED THEN RERA CAN BE A FACILITATOR IN TERMS OF REFUND OF MONEY, ADEQUATE COMPENSATION AND PENALTIES IMPOSED.” PARVEEN JAIN
“PRIMARILY THE AUTHORITIES HAVE BEEN FUNCTIONING TREMENDOUSLY WELL AS REGULATORS, BUT HAVE OFTEN BEEN CRITIQUED FOR THE LACK OF IMPLEMENTATION OF THE ORDERS PASSED REDUCING THE RELIEF GRANTED ONLY TO PAPER ORDERS. ANOTHER CRITIQUE OFTEN VOICED BY STAKEHOLDERS IS THAT IN A FEW STATES, THE ACT IS NOT APPLICABLE TO THE ENTIRE STATE BUT ONLY TO “PLANNING AREAS” THEREBY EXCLUDING PROJECTS WORTH THOUSANDS OF CRORES.” SARTHAK BHANSALI
“RERA AUTHORITY HAS THE POWER, UNDER SECTION 32(F) OF THE ACT, TO MAKE RECOMMENDATIONS FOR MEASURES TO BE TAKEN IN THE GRADING OF PROJECTS AND PROMOTERS. IF EFFECTIVELY EXERCISED, MAKING ANNUAL/HALF-YEARLY GRADING ON CERTAIN PRE-DECIDED PARAMETERS LIKE CONSTRUCTION QUALITY, CONSUMER-CENTRIC APPROACH ETC, IT CAN ACT AS POSITIVE REINFORCEMENT FOR THE PROMOTERS AND CREATE A BASIS FOR THE ALLOTTEES TO TRUST THE INDUSTRY AS A WHOLE, THEREBY, NOT ONLY CREATING HARMONY BUT FURTHERING THE GROWTH OF THE REAL ESTATE SECTOR.” HARSHIT BATRA