Dilution of Central RERA a picture of despair: Report

In the past one year, RERA compliance in some markets has been a prominent factor for price rationalisation in the residential segment as it has put a break on pre-sales activities and fund mobilisation by developers' at the once popular “soft launch” stage.

There have been instances where developers have resorted to selling inventory at a marked discount in a bid to raise finances as no sales at pre-launch stage are allowed now.

New supply in the residential segment has also taken a massive hit as RERA compliance and mounting unsold inventory pressures have forced developers to curtail launches. In 2017, new residential supply across the top eight Indian cities (Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, NCR and Pune) plunged by 41% over 2016. NCR was the worst hit market where a 56% annual drop was noted. However, the progress on RERA compliance across the country still presents a gloomy picture, the whitepaper notes.

Permanent Regulator in 25 states yet to see light of the day

Sections 20 to 39 of the Central RERA outlining the process for setting up a Real Estate Regulatory Authority came in force two years ago, but only 3 states (Maharashtra, Madhya Pradesh and Punjab) have established a permanent one so far. The devil, as we know, is in the detail.

Firstly, while the Central act permitted states to designate any regulatory authority as the Real Estate Regulatory Authority, it did not define any timeline when such an “Interim” Regulator should cease to exist. Secondly, since the interim regulators are only “designated” as a Real Estate Authority, it is only an additional responsibility for them to implement the rules and regulations as per RERA. Hence, their efforts fall short of the intended goal of a dedicated real estate regulator, according to the whitepaper.

From the consumers' perspective, RERA implementation and compliance needs undivided attention and focus from regulators for smooth operations. Sadly, most states have been playing the waiting game about getting a Permanent Regulator after handing over the reins to such “Interim” authorities. What was strictly supposed to be a stopgap arrangement has turned into a standard, said the whitepaper.

Such authorities are making half-hearted attempts as evident by progress on even basic parameters like getting the portals up and running, registering projects and agents. Since the Central RERA also stipulates transfer of all applications, complaints or pending cases to Permanent Regulators, the “Interim” regulators seem to let the grass grow under its feet. At present, 25 Indian states are yet to establish Permanent Real Estate Regulators, it says.

What are the disadvantages if the Interim Real Estate Regulators continue to operate?

Focus of regulators, whether permanent or interim, is to maintain RERA compliance visibility. However, with interim regulators, creation of an information rich portal and supporting infrastructure still remains work in progress. Hence buyers are left with no other choice but to resort to third party information for real estate due diligence, the Knight Frank whitepaper on RERA said.

The administrative nonchalance puts a big question mark on the efficacy with which consumer disputes are addressed, ruled and made available to public at large. Also, several officers in interim regulators are heads of state level development departments, development authorities and housing boards. This raises a very pertinent question – will there be no conflict of interest when these officers have to evaluate cases pertaining to projects where the said bodies are promoters/developers? In all likelihood, justice in real estate rulings would be tainted by bias, it added.