The Central government Central Advisory Committee (CAC) is considering a proposal to strengthen the Real Estate Regulatory Act (RERA), 2016, by way of an amendment in order to improve the process of executing recovery warrants issued to developers for not handing over possession of homes to buyers.
Recovery warrants are issued by the regulator when developers fail to compensate homebuyers for delays in handing over their flats. The warrants are sent to collectors who are tasked with attaching their property and can auction them to recover the dues.
“Execution of recovery warrants issued by RERA regulatory authorities across states is facing several issues. We are working on a proposal that will be submitted to the Central government for amendment or improvise the current provisions to make RERA stronger for execution of recovery warrants,” said Ajoy Mehta, Member of CAC and chairman of the Maharashtra Real Estate Regulatory Authority (MahaRERA).
The committee is working on ways to empower RERA in this regard, said Mehta.
“We are planning some mechanism to give more powers under the existing provisions and are also considering a proposal on some form of amendment,” he said.
Currently, the recovery process gets hampered by issues such as claims on the title or ownership of the property and, in many cases, there is ongoing litigation.
Mehta also spoke to Moneycontrol about other aspects of RERA.
Mechanism required
The need for a mechanism to execute the recovery warrants was emphasised at a meeting of a sub-committee constituted by Central Advisory Council on November 2, 2022, under the chairmanship of the secretary of the ministry of housing and urban affairs.
“Secretary, Uttar Pradesh Regulatory Authority expressed his concern about the non-compliance of orders passed by RERA. He suggested that some recovery mechanism may be included in RERA,” the minutes of the meeting showed.
The Central Advisory Council (CAC) was set up by the Central government for the effective implementation of the real estate law in the country.
Recovery rate in Maharashtra
According to MahaRERA, recovery warrants for about Rs 625 crore were issued against real estate developers in Maharashtra for violations of RERA. Of them, 20 to 30 percent have been executed and the rest are under process.
“We want to ensure that the recovery ratio improves,” Mehta said. “Our role is to issue the warrants. It is the state government's administration that must execute the warrant. Recently, we sent reminders to the administration for execution of the recovery warrants and are following it up.”
Disruption in real estate sector
Mehta said RERA has disrupted the real estate sector and made a group of powerful people accountable.
“Now, we can say that everyone has been brought to an equal stage where homebuyers and developers have the exact same information about a particular project,” he said.
Wider RERA compliance
According to MahaRERA, more than 50 percent of project registrations and complaints are from the Mumbai Metropolitan Region. MahaRERA is working on increasing awareness in smaller cities and towns in the state.
“We are trying to ensure penetration of RERA compliance in tier two cities and tier three towns and ensure RERA does not remain a Mumbai and Pune thing. We are getting registrations and complaints from small towns and this is proof that the compliance level is increasing,” Mehta said.
The regulator has registered 40,192 projects in Maharashtra and has resolved 14,000 out of 20,000 complaints, as of March 2023.
Inclusion of redevelopment projects
Currently, RERA covers new projects or construction that has started on empty land. There have been calls for the act to also cover the redevelopment of old buildings.
“As of now, redevelopment projects are not covered under the ambit of RERA, and it depends on the state government if they want to do that," Mehta said.
Financial institutions
Another aspect is whether financial institutions should be covered by RERA. Apart from the funds deposited by buyers, money for real estate projects comes from loans or advances from financial institutions.
Mehta said MahaRERA is helping financial institutions, developers, and homebuyers by trying to ensure there are no stalled projects.
Currently, financial institutions are regulated by the Reserve Bank of India and the Securities and Exchange Board of India, he said.
Non-compliance notices
Mehta explained the rationale of issuing notices to developers for non-compliance with regard to providing details of finances and other aspects of a project.
“We are going on a case-by-case basis and are expecting developers to comply and ensure that they upload and give all details about their project,” Mehta said. “My aim is not to punish or penalise someone, but to get the project moving. The purpose of the homebuyer is solved only when he gets his or her flat or possession of the property they have purchased.”
Also read: Real Estate projects to get QR code to empower homebuyers, says MahaRERA
On grading real estate developers
The Bombay High Court, while hearing a case relating to a stalled real estate project in Mumbai on February 3, asked the state government whether MahaRERA could rate or classify developers so that people could make better and informed decisions when choosing a project.
Legal experts told Moneycontrol that grading developers and projects is possible and the RERA Act empowers the authorities to do so.
However, Mehta said he would not comment on the matter, considering it is sub judice.
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