Touted as a consumer-centric Act, the RERA aims to drive transparency and accountability in the sector and enhance the confidence level of home buyers. More importantly, it will not only protect the interests of home buyers and developers but also ensure home buyers are not taken for granted by real estate developers and brokers.
It may be worth mentioning that both houses of Parliament had passed the real estate bill in March 2016. It is important to point out that the onus is now on the states to draft and pass their own laws according to the guidelines since land is a state subject.
The effective implementation of RERA is expected to mitigate the pain points of the sector. Although real estate players have welcomed the new Act, industry watchers believe that there are still challenges that need to be overcome before the much-hyped Act is effectively implemented. Many states are not still adequate prepared with the desired infrastructure and resources to implement the Act. What’s more, most real estate developers and brokers have indicated that they are still in the process of understanding the regulations. The response from the states to the Union government’s April 30 deadline to notify the Act left a lot to be desired with only 13 states and union territories having notified the rules so far – only three states – Maharashtra, Madhya Pradesh and Rajasthan – have appointed a housing regulator. Significantly, barring Maharashtra no state has set up a website where developers and brokers can register or apply for new projects under the new Act. All these effectively mean that teething problems exist, which have to be resolved before the Act is implemented across the country.
The Act makes it mandatory for all real estate developers and brokers to register with their respective state regulatory authorities by July 30 without which they cannot sell any project. It remains to be see whether all builders and agents meet the stipulated deadline. For now, it does appear a tall order simply because most states do not have a regulatory authority and nor have websites ready to apply, which mean no new registrations and project launches can take place in these states. It is only a few big states with major real estate activities that are in advanced stages of either having notified (the new rules) or are geared up to comply with RERA.
Real estate lobby group Confederation of Real Estate Developers Association of India (Credai) is aware of the challenges the new Act offers for developers. Credai feels that real estate developers will face teething problems, which will result in new project launches getting delayed and home sales getting impacted for the next few months.
According to industry experts, most developers would be need about six to eight weeks of work to make themselves RERA compliant. It will not be easy for developers and agents to be RERA-compliant in a sector, which has been under no regulation for so long. Despite all the initial challenges, the RERA is a win-win situation for buyers and developers. But there are areas that would pose concerns for real estate developers. Developers would be held responsible for any delays caused by other agencies or authorities. From this perspective it does appear that RERA will end up favouring home buyers at the cost of builders and developers.
On the positive front, the RERA will instil a sense of fiscal discipline – it ensures no developer can transfer funds meant for one project for another. This measure will ensure sufficient funds for timely completion of projects as well as for timely delivery of flats to the home buyers.
The smooth implementation of the RERA may take some months, but there is no doubt that the Act will change the way real estate developers operate across the country. RERA was just what the doctor ordered for the Indian real estate sector.