It’s been a month since the Real Estate (Regulation and Development) Act, 2016 (RERA) became effective. Developers and real estate agents now have exactly 60 days to get their ongoing projects registered with RERA i.e. until July 31, 2017, provided states have the rules, a regulator and a website up and running by then. Here’s the report card on what states have achieved so far.
RERA rules have so far been notified by 18 states and Union Territories. Draft rules have been prepared by 10 states and Union Territories. Permanent regulatory authorities have been set up by only two states so far and these include Madhya Pradesh and Maharashtra. An interim authority is in place in 12 states and UTs. As many as 19 states and UTs are in the advanced stages of appointing an authority. Only six states and UTs have set up an interim tribunal.
Minister of Housing and Urban Poverty Alleviation M Venkaiah Naidu has said that it is mandatory for states to notify the RERA rules. “Most of them have done it and some have provisional rules in place. By July if they do not appoint a regulator or an appellate tribunal, you cannot register projects and everything will come to a standstill. There will be chaos in the market. Keeping that in mind, I have been sensitising states and most of them have said that they will be able to notify rules and appoint a regulator by end of this month.”
Sources say that the government has written several letters to the state governments and held consultations both at the national and the regional level. The Urban Development Ministry is taking stock of the progress and has been assured by states that they would meet the July 31 deadline. “As many as 18 states and UTs have already notified the rules so far and two have a full-time regulator in place. More states will come on board before the deadline,” they say.
Haryana has assured that it will have its rules in place by June. Uttar Pradesh has decided to revisit some rules and already has an interim regulator in place. UP’s website, too, will be up and running before the deadline, say sources.
As for the Central Advisory Council that is required to be set up at the Central level under the Act, it will be ready once at least five to six full time regulators are in place, say sources. Under the Act, the Central Advisory Council shall advise and recommend to the Central Government on all matters concerning the implementation of RERA, towards matters of protection of consumer interest and foster the growth and development of the real estate sector.
Sources say there has been no delay in setting up the Council because the Act does not provide for any timeline for its constitution. “Besides officials from various ministries, National Housing Bank, Housing and Urban Development Corporation, five representatives of state governments to be selected by rotation and five representatives of the Real Estate Regulatory Authorities to be selected by rotation have to be part of the Council. Once at least five full time regulators are in place, we will set up the body,” they say, adding it should have a pan-India representation.
What have states done so far?
Eighteen states and UTs that have notified RERA rules are Uttar Pradesh, Gujarat, Odisha, Andhra Pradesh, Maharashtra, Madhya Pradesh, Bihar, Chhattisgarh, Rajasthan, Uttarakhand, Assam, Jharkhand, NCT of Delhi (by Mo/UD), Andaman & Nicobar Islands, Chandigarh, Dadra & Nagar Haveli, Daman & Diu and Lakshadweep. Draft rules have been prepared by 10 states that include Tripura, Karnataka, Kerala, Tamil Nadu, Punjab, Haryana, Himachal Pradesh, Mizoram, Telangana and Puducherry.
Maharashtra and Madhya Pradesh are the only two states to have a permanent authority in place and whose websites are ready.
Maharashtra has received applications from at least 10 developers and 900 real estate agents. In Karnataka, the implementation of the Act has been delayed by some more time as the Cabinet has failed to take a decision with regard to notifying the final rules.
“Haryana government has so far received about 1,870 suggestions from the public and the final rules are likely to be published by June 15,” says Dilbag Singh Sihag, RERA Haryana Committee and chief town planner, Haryana (Retd).
“The regulatory authority may take another two to three months. Until then the interim authority will do its work. Another two to three months will be required for the website. But we have started taking hard copy (manual) applications and have received four to five applications of ongoing projects so far. Applications for real estate agents, too, will be taken manually. Any application that is received for registration, our target is to dispose it within 15 days after the final rules are in place,” he says.
In Madhya Pradesh, the state has issued a revised set of rules last week wherein it has decided to reduce the registration fees from Rs 20 per sq m for residential projects to Rs 10 per sq m and from Rs 50 sq m for commercial projects to Rs 20 per sq m.
It will be holding regional stakeholder workshops in Indore on June 6, June 9 in Jabalpur and June 13 in Gwalior. “Our intention is to address queries of developers and physically demonstrate the working of the website. Many builders have prepared their documents and most of them are waiting to attend the conference first before they register the projects. Over a dozen real estate agents have registered so far. As many as 30 complaints have been registered. The first hearing was held on May 24 and one case has already been resolved. At least two to three applications have been received from builders so far,” informs Anthony de Sa, Chairman, MP Real Estate Regulatory Authority, Government of Madhya Pradesh.
“We are hoping to clear all applications within seven days and a maximum of 30 days of receiving them,” he says, adding a 12,000 sq ft RERA Bhavan has been set up at a cost of Rs 2 crore in the state and some staff that includes officers on deputation and consultants are already on board.
Reasons Behind Delay
In states where there is a regulator in place, developers are taking time to register their projects because of the large amount of information that is required to be uploaded on the website, say real estate experts.
“They have to receive certifications by the architect, chartered accountant and compliance issues need to be addressed before uploading the information. Details of real estate agents, their registration numbers are also required. Many brokers are in the process of registering themselves in Maharashtra, so all these factors need to be considered,” says Neeraj Bansal, Partner and Head of Real Estate and Construction, KPMG in India.
In Maharastra, there are over 50,000 projects and all of these will have to be registered. “We are hoping that the registration process will pick up in June. It’s the small developers that will require hand holding,” he says.
What about banks?
In Mumbai, where registration of projects is currently on, some banks have decided to disburse loans after RERA registration of projects but there is no clarity on how the amount will be disbursed from an escrow account. In some cases, builders have been asked to open a collection account with a bank where 70 percent of the amount collected from buyers needs to be parked. “But there is no clarity on the frequency of disbursements from the escrow account whether they will be on a monthly basis or a quarterly basis,” says a senior banker on condition of anonymity.
What do home buyers have to say?
Home buyers were celebrating when RERA was passed by Parliament but thereafter it has been one disappointment after another, says Abhay Upadhyay, national convenor, Fight for RERA.
“This is because of the tardy progress made by some states in implementing the rules and setting up a regulatory authority. Some states have also diluted the rules. It is all the more disheartening to note that BJP-ruled states have not only diluted RERA rules but have also not appointed authorities nor set up web portals,” he says.
The delay in framing rules and setting up a regulator have impacted home buyers’ decisions, too. “They are confused about which agreement to sign. Are they signing a RERA-compliant agreement for a RERA compliant project?” ask experts.
Overseas investors, too, have no clarity and many states may miss investment opportunities if they do not get their act together. “The delay may lead to many funds deciding not to invest in non-RERA compliant states. States may miss out on investments due to the slow and gradual approach to putting RERA processes in place,” says Bansal.
“Builders at their end are trying to keep all the documents ready and complete the formalities once online registrations start in Uttar Pradesh. Many home buyers to have been waiting in the wings to take a decision. Once RERA comes in, it will improve market sentiment,” says Manoj Gaur, Vice President, CREDAI – National & MD, Gaursons Group.
Under RERA each state and UT will have its own Regulatory Authority (RA) which will frame regulations and rules according to the Act. But not all states have a real estate authority in place yet and some with one have diluted the original provisions as per the Central Act. RERA covers both new project launches and on-going projects where the completion/occupation certificate has not been received.According to the provisions of the Act, for ongoing projects which don;t have a completion certificate issued, developers have to make an application to the authority for registration of projects within a period of three months from the date of commencement of this Act which was May 1. The Act also calls for mandatory registration of real estate agents and calls for developers to set aside 70 percent of the funds collected from buyers in a separate escrow account to ensure that projects are completed on time.