Vandana Ramnani Moneycontrol News
The NDA-led government launched the Housing for All scheme within five months of assuming office and the smart cities initiative within two months. The much-awaited Real Estate (Regulation and Development) Act, 2016 (RERA) was passed by parliament last year and the Union Ministry of Housing and Urban Poverty Alleviation set aside time till May 1, 2017, for states to notify rules for the functioning of the real estate regulator. In short, the real estate sector is now under the RERA regime.
It is a game-changer in the history of real estate in India as it intends to protect the interests of both homebuyers and developers. The Act seeks to bring over 80,000 registered builders in India under its purview to ensure that there is a level-playing field between both stakeholders. It includes stringent clauses to curb the siphoning-off of a particular project’s funds for land acquisition, rampant construction delays and bans the practice of pre-launches.
All projects (commercial and residential) having land area over 500 sq m or eight apartments, will now have to register projects with the real estate regulator before launching them. It brings under its ambit ongoing projects that have so far not received the occupation certificate. It defines carpet area as the basis for project selling and registration and makes it mandatory for developers to maintain an escrow account for every project in which 70 percent of the receipts will be kept to ensure smooth construction flow.
A level-playing field
Besides defining penalties for builders who default, RERA lays down that buyers must make payments on time including their share in the registration charges, municipal taxes, maintenance charges and have to participate in the formation of an association of allottees and take physical possession of the unit within two months of the builder getting the occupancy certificate. There are some stringent penalties for homebuyers if they fail to comply with the orders or decisions of the Appellate Tribunal.
Teething issues persist
It will take a few more months for states to put in place basic infrastructure such as a regulator’s website and less than a year for confusion to settle. So far only Maharashtra has a real estate regulator’s website. Within the first three days of its initiation on May 1, over 400 real estate developers in the state have started the process of registering their respective projects under RERA, while over 800 property brokers across the state have also set the process in motion.
Complements other reforms
It is a landmark measure because it complements other reforms of the government. It helps to push the Housing for All by 2022 agenda and that of providing affordable housing. Budget 2017 had proposed an infrastructure status for affordable housing and also increased the allocation for the Prime Minister Awas Yojana from Rs 15,000 crore to Rs 23,000 crore, bringing the country closer to realising the Housing for All mission by 2022.
While the intention of the Act is to protect the rights of both buyers and developers and provide an adequate platform to seek justice for those affected, it fails to address the issue of delays from the approval authorities.
But changes are not expected overnight. One can expect traction in real estate sales in the next three to six months depending on how fast states adopt the rules without diluting the intent of the Central Act.
Most states and union territories have so far watered down the definition of common areas and in some cases even increased the timelines for delivery of projects. The Gujarat government has decided to exempt all ongoing projects that were launched before November 2016 from the purview of RERA and Uttar Pradesh has excluded projects for which completion certificate has been applied for.
Impact on real estate prices
Impact on real estate prices may pan out in the next 6-12 months as a result of GST, RERA and also the unsold inventory available in the market. Enforcement by the regulatory authority will determine whether there will be adjustment requirement in pricing keeping in mind the demand and supply.
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