Karnataka Elections: Homebuyers, experts seek policy changes from new MLAs

Bengaluru residents and experts said that once the next government is in place, they expect policy changes for issues ranging from empowering the regulator to regularising unplanned development in the city.

On May 13, the day of counting votes in the Karnataka assembly election 2023, it should become clear which party or coalition will rule the state for the next five years. Regardless of whether it is the ruling Bharatiya Janata Party or the Congress that comes to power, legislators in the next assembly will have some real estate issues to resolve.

The two main political parties have already promised an array of reforms to address issues faced by homebuyers and tenants in the state, especially Bengaluru, should they be elected to power. Both the BJP and the opposition Congress promised to amend the contentious Karnataka Apartment Ownership Act, 1972, to protect homebuyers' rights.

The BJP has promised to create a Karnataka Residents' Welfare Consultative Committee to improve “ease of living” for homebuyers. The Karnataka Apartment Ownership Act will be reviewed by the committee, which will suggest further amendments.

The Congress party pledged in its manifesto to streamline the process of transferring land titles to homebuyers. The Janata Dal (Secular) did not make any promises for the state's real estate sector.

Bengaluru residents and experts told Moneycontrol that once the next government is in place, they expect policy changes for issues ranging from empowering the regulator to regularising unplanned development in the city.

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Streamlining Karnataka RERA

In May 2017, the state notified the Karnataka Real Estate Regulatory Authority to protect homebuyers and regulate the sector in the state. About six years after its enactment, several inefficiencies continue to affect homebuyers who have invested in their dream homes.

Among the issues is the struggle to get refunds from builders who fail to deliver apartments on time. What the regulator can do at this stage is issue a revenue recovery certificate (RRC) and ask the state revenue department to begin recovery proceedings against such builders in the form of compensation or a refund to homebuyers. However, a long wait invariably ensues.

According to Sudhakar Laxman, who invested about Rs 80 lakh in a project in Bengaluru, after the RRC order was passed in 2021, the first notice from the district commissioner’s office went to the developer in 2022.

“After that, everything has been on hold. About 10 homebuyers are planning to move the Karnataka High Court to speed up the process to get our money back," Laxman told Moneycontrol on May 10.

Of all the RCC orders passed in the state, money has been recovered for only 12 percent of them as of June last year, according to a document issued by the undersecretary of the regulator that Moneycontrol reviewed.

Vittal BR, an advocate, said policymakers can amend the state RERA rules to give it additional powers and add a time limit to this process.

“Uttar Pradesh, Maharashtra and Bihar have notified special powers for RERA to seize and auction assets in such cases,” Akash Bantia, another advocate, said on May 9. “At the policy level, our state government can notify a standard operating procedure to do the same.”

If this is done, the KRERA will have the power of civil procedure codes to summon people, call witnesses and even issue arrest warrants, he said. Advocates claimed this will speed up money recovery by at least 60 percent.
Additionally, there is the issue of removing partial occupancy certificates from the state's RERA rules, in keeping with the central Real Estate (Regulation and Development) Act of 2016.

Currently, the Karnataka real estate regulator holds that homebuyers cannot claim compensation in delayed residential projects that have obtained partial occupancy certificates.

Removal of partial occupancy certificates will offer more clarity to homebuyers, said Dhananjaya Padmanabhachar, president of the Karnataka Home Buyers Forum.

Standardisation of association registration

In Karnataka, there are dual laws for registration of resident welfare associations, which lawyers said must be updated and harmonised. According to the RERA Act, after a development is completed, the builder must hand over the undivided share in the project to the resident welfare association (RWA) registered under the laws of their respective states.

RWAs in the state have been registered under the Karnataka Cooperative Societies Act, 1959, and the Karnataka Apartment Ownership Act, 1972, for which the state government has not notified the rules of competent authority.

Bantia said a major policy change is required to standardise the bylaws and to notify KAOA 1972 for its competent authority.

"Even the KSCA 1959 is largely outdated and there are several cases already at the Registrar of Societies to solve issues such as allowing online RWA polls. During the pandemic, the state government brought out SOPs for e-voting but for a limited time, and I believe this can be done today,” he added.

Rental frenzy

It’s not homebuyers alone who are seeking resolution from the to-be elected MLAs for their problems. Even tenants face issues, most notably, a sudden increase in rents and demands for exorbitant deposits.

Nidhi Agarwal (name changed), a marketing professional who lives on Sarjapura Road in south-eastern Bengaluru, said on May 9 that her landlord suddenly increased the rent by 50 percent. Agarwal is still trying to negotiate with the landlord, she added.

With reverse migration, or people returning to offices from other cities, and a severe mismatch in demand and supply of available homes to rent out, the situation has worsened. Even security deposits can touch Rs 1 lakh.

Additionally, the academic and professional records of prospective tenants are being scrutinised. Tenants must have at least 90 percent marks in class 12 or a workable LinkedIn profile to clear landlord interviews to rent an apartment.

Advocates said the state does not have policies to protect tenants or prevent arbitrary rental increases.

Karnataka is yet to incorporate the Model Tenancy Act (MTA), which provides for regulation of tenancy terms and conditions and brings transparency between the parties. The act establishes a Rent Authority and Rent Court in every state and Union Territory to address grievances and solve disputes.

However, land and urban development are state subjects and only Andhra Pradesh, Tamil Nadu, Uttar Pradesh and Assam have revised tenancy laws in line with the new act.

Amith Amarnath, an advocate, told Moneycontrol earlier that policymakers need to consider notifying this act to regulate the rental market in the state, especially Bengaluru.

“The Model Tenancy Act caps the rental deposit, hence protecting the tenants. This can stop sudden rental hikes, as seen in Bengaluru today, and the Rent Authority set up by the act will look into the disputes without burdening the civil courts," he said.