Realty News

Maharashtra RERA Rules in Place to Protect Homebuyers from May 1

Among small group of states & Union Territories to notify RERA; others could miss April 30 deadline

ramesh-nair

Ramesh Nair – CEO & Country Head, JLL India

 

 

With Maharashtra setting up a regulator in accordance with the Real Estate (Regulation and Development) Act – more commonly known as RERA -  it joins a small community of States that have notified their respective realty regulators to be set up for the first time ever. With the April 30 deadline for all states to pass RERA for their respective regions looming, only 13Sstates and Union Territories have reportedly notified their rules so far.

While the Centre had first shown the way to states by implementing RERA in the union territories last year, only Uttar Pradesh, Gujarat, Madhya Pradesh, Odisha and Delhi followed in its footsteps by notifying RERA rules in the ensuing months for their respective regions. Though Maharashtra’s draft RERA rules had covered all under-construction projects, irrespective of whether some of the individual towers/ phases received occupation certificate or not, it had diluted some other sections.

After activists raised objections, the Maharashtra Government decided to include these sections too. Similarly, buyers’ associations in both UP and Gujarat have been demanding that the States append missing sections in the State versions. Sixteen other States – including Haryana, Punjab, Kerala, Rajasthan, Karnataka, West Bengal, Bihar, and Tamil Nadu – have reportedly prepared draft rules and are expected to notify them soon.

Protection Against Project Delays & Defects

The Act passed by Indian Parliament last year, which was expected to be implemented in its full entirety by all States, is very clear on the subject of under-construction residential projects. Developers of ongoing projects as on the date of commencement of the Act in the respective State which have not received a completion certificates prior to the commencement of the Act will need to apply to the regulatory authority for registration of their project within three months of the commencement of the Act.

Whether all such ongoing projects get covered under the Act will, however, depend entirely on the respective State Governments. The consumer-centric law prescribes compulsory registration of all ongoing and upcoming real estate projects, as well as penalties and punitive measures on developers who delay their projects. All developers are required to disclose their project details on the regulator’s website, and provide quarterly updates on construction progress.

In case of project delays, the onus of paying the monthly interest on bank loans taken for under-construction flats will lie on developers – unlike earlier, when the burden fell on homebuyers. A separate account will be used to deposit 70% of the money collected for the project’s construction, and developers can draw from it only for construction purposes. The appellate tribunal will hear and act on all related grievances.

RERA also states that any structural or workmanship defects brought to the notice of a promoter within a period of five years from the date of handing over possession must be rectified by the promoter, without any further charge, within 30 days. If s/he fails to do so, the aggrieved allottee is entitled to receive appropriate compensation under RERA.

Brokers to under RERA’s ambit
  • In the addition to the promoter and allottees, RERA will also bring real estate brokers, who facilitate the sale and purchase of units in a project, within its ambit.
  • India’s real estate broking business was one of the easiest ones to enter and operate.
  • It’s called for no specific qualification, experience or code of practice and the government agencies only prescribed guidelines- rather expectations- from the broking community without defining roles and responsibility.
  • This will change as RERA demands all property brokers be registered with the regulator to be qualified for doing property brokerage business.
  • While the regulator is not expected to introduce qualifying criteria immediately, this registration will be conditional to broker’s acceptance of accountability and code of business practice. This will bring in transparency and responsibility the two virtues this sector need badly.

With the Central Government repeatedly nudging States to notify RERA latest by April 30 and establish their regulatory authorities and appellate tribunals, the question of how many will comply looms large. As a disruptive and groundbreaking legislation to clear opacity in the Indian real estate sector and make it more buyer-friendly, RERA definitely needs to be implemented in letter and spirit by all the States.

Real Estate : 2014

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With economy witnessing a downturn, interest rates and inflation reaching all-time highs, 2013 has been one of the most eventful years for Real Estate in India. While introduction of Real estate regulatory bill and land acquisitions bills in the parliament was positive for the real estate industry, end users sitting on the fence expecting a fall in prices lead to a contraction of demand in the past few quarters. This year Mumbai, Kolkatta and other key markets saw less activation from real estate players as delay in approval process impacted project launches.

The market has turned from sellers to buyers in 2013 with attractive offers from various developers across the range of projects. The Indian economy is recovering and real estate sector is expected to stabilize in the next two to three quarters. We would anticipate this sector to grow, albeit at a slightly lower pace, as the demand for housing still appears to exceed supply, and the weakening rupee makes India an attractive real estate investment destination for non-resident Indians. We expect the market to start an upward momentum by end of 2014 and suggest end users and investors to utilize this opportunity to book their dream homes as these offers would vanish once the economy starts showing signs of recovery.

9Stability in property prices during 2013 will give the required confidence to consumers who have been delaying their decision to book their dream homes in 2014. We believe that affordable and low-housing segment is likely to see the highest growth but other segments will also grow as people aspire for better homes, better quality of life and hence invest more in buying their own homes. On the other hand, the demand for luxury housing in India will continue to growing due to influx of global lifestyle trends along with changing lifestyle and aspirations seen amongst young India. The demand for luxury homes has been increasing from cities such as Bangalore, Delhi, Chennai, Kolkata, Mumbai and others.

The key reasons responsible for the growth seen in the real estate industry in India include liberalization of Government policies. Furthermore, FDI in multi brand retail will also give a push to the growth in the real estate sector. It will trigger the opportunities for retailers thus leading to an increase in demand for real estate. Ancillary and service industries such as IT/ITes, manufacturing industries which are being set up in tier 2 and tier 3 cities also play an important role for rise in property demand.

10As the recession market, we need to concentrate on execution as that would help in building the credibility and that’s the opportunity the branded players can built up. Going forward the key to real estate growth would be to get infrastructure status with relevant subsidy for affordable housing, subsidy on technology enhancement so that less dependent on manual labour, curb on raw material cost as that will impact the quality and timeline. Finally the interest rate to be reduced so as to make it attractive enough for buyers