Moneycontrol PRO

Here’s why RERA is still a work in progress four years on

Harassed homebuyers who assumed that RERA would act as a watchdog are wondering what purpose the regulatory body serves. Here’s a look at why RERA hasn’t lived up to its promise

In May, the Supreme Court had said that WBHIRA creates a parallel regime and is in direct conflict with the Centre’s Real Estate (Regulation and Development) Act (RERA). The state law has encroached upon the domain of the Parliament and hence is unconstitutional, the verdict said. (Representative image)

In May, the Supreme Court had said that WBHIRA creates a parallel regime and is in direct conflict with the Centre’s Real Estate (Regulation and Development) Act (RERA). The state law has encroached upon the domain of the Parliament and hence is unconstitutional, the verdict said. (Representative image)

With the Allahabad High Court rapping the district magistrate of Gautam Budh Nagar, Uttar Pradesh, over non-compliance with a Recovery Certificate (RC) issued by the Real Estate Regulatory Authority (RERA), the focus is once again on the non-execution of RERA orders.

The High Court (HC) was appalled to note that the RC — a RERA order that directs a builder to refund buyers for failing to deliver a project on time — was kept pending for two-and-a-half years. However, this is not something unique to Gautam Budh Nagar, home to the largest property market of India; RERA orders are being kept in abeyance at the administrative level across the country.

Homebuyers have for long alleged that RERA has failed to provide them substantial relief in the wake of project delays or defaults. Now, the Allahabad HC has also taken cognisance of the issue and has not only questioned the reasons for non-execution but also asked for a roadmap on how RERA RCs will be executed.

Advocate Nirmit Srivastav, who appeared before the HC in the given case, agrees that even when a RERA judgment is secured in favour of homebuyers, the execution process more often than not defeats its very purpose. I asked him whether this order would serve as a warning to District Administrations across the country. The lawyer admits that in the absence of any powers to direct Development Agencies and the District Administration, the High Court is the only ray of hope.

But how many harassed homebuyers have the fiscal and legal bandwidth to knock on High Court doors?

Close

It is no wonder then that a pan-India survey by Track2Realty finds that no less than 82 percent of homebuyers don’t find any tangible change on the ground post RERA as far as the real estate ecosystem is concerned. As many as 78 percent maintained that their hopes of seeing RERA act as a watchdog and custodian of due diligence have been dashed.

Four years after its implementation, RERA still appears to be a work in progress. Here’s why RERA has not lived up to the purpose for which it was set up:

Not a watchdog

RERA was initially envisaged as a watchdog that could take pre-emptive action against builders. It was even suggested that RERA should have the power to verify the credentials of developers and deny a new license if they were found to have defaulted twice in the past.

In a business where the entry barrier is non-existent, that would have also served as a qualitative entry barrier. RERA, as it turned out, has emerged as just another window of litigation for buyers. It only acts on the complaints filed by aggrieved homebuyers.

No stamp of due diligence 

‘RERA Approved Project’ is something that should have sounded like a sovereign guarantee for homebuyers. An average homebuyer without knowledge of what approvals, sanctions and/or financial viability make a project complete would have the confidence that RERA-approved meant due diligence had been done. Unfortunately, RERA has turned out to be like any other government agency distributing sanctions, without any accountability or liability. Advertising brochures with “CREDAI Member” and ‘RERA Approved’ claims are all the same for homebuyers.

Lack of infrastructure

In most states, RERA in general, and its officiating members in particular, do not even have the necessary infrastructure to verify documents submitted by builders. Homebuyers who check the RERA website for their own due diligence maintain that all project details uploaded by developers are 150 DPI (dots per inch) scans, meaning: they are very difficult to read. Unless someone files a specific complaint against a specific project, RERA officials do not have infrastructural support to cross-check and reject such uploads.

Connected parties not accountable

Development bodies of the government are not accountable to RERA nor are they liable for any inaction that delays the project. Similarly, banks that offer liberal lending without their share of due diligence are in no way accountable to RERA. If the project is stuck, the banks hound the homebuyers and not the builders. Unless RERA has some judicial teeth to question government agencies and lending institutions, it cannot expedite a project in case a builder has suffered due to procedural delays on the part of the agencies.

Liberal in the name of project viability

RERA is not meant just for real estate regulation but also for its development. This dichotomy more often than not tilts RERA members to support the business. With retired bureaucrats serving as RERA officiating members, in many cases, builders have been allowed to get arbitrary execution timeline extensions. Furthermore, despite the fact that the RERA Act in principle empowers homebuyers to demand a refund in the wake of delays, in reality, such demands are often turned down if the project is ready by the time the complaint is filed.

Orders being challenged and not executed

The most common grouse of home buyers is that RERA is not a one-stop judicial solution. Its orders are challenged by builders before the Tribunal and then the Higher Courts. Since the average homebuyer waits for a home with the dual burden of rent and easy monthly instalments (EMIs), he or she cannot go in for lengthy and expensive litigation. The builder has the last laugh and the buyers end up having to compromise. Furthermore, the District Administration more often than not keeps RERA RC orders pending for more than two years. The Allahabad HC was baffled by this inaction and rapped the District Magistrate of Gautam Budh Nagar.

It is therefore no wonder that RERA fails to evoke confidence among homebuyers. Unless the authority is empowered, is proactive, and faces challenges to its orders in Higher Courts only on technical merit, it will be nothing more than another litigation window. As it stands, harassed homebuyers, who assumed that RERA would be the last stop for litigation, are wondering what purpose the regulatory body serves.

The author is CEO at Track2Realty
Ravi Sinha is CEO, Track2Realty.
first published: Oct 27, 2021 12:35 pm

stay updated

Get Daily News on your Browser
Sections
ISO 27001 - BSI Assurance Mark