Indian real estate sector witnessed a giant leap towards regulation with the Real Estate (Regulation and Development) Act, 2016 (RERA) coming into effect. The path-breaking Act is set to bring in discipline to the sector and keep unscrupulous activities in check. Among the 92 Sections of RERA that have come into force, is the rule that all projects that have not received completion certificates thus far, and that are yet to be launched, will come under its purview. Considering the rapid urbanisation and increased disposable income in the hands of the consumers both in the metros and Tier II and III cities, the demand for housing in the country is growing more than ever before. In such a scenario, a regulatory policy is indeed a welcome step for all stakeholders involved in the process of developing and buying a home.
RERA’s various beneficiaries
While transparency and accountability are the overarching benefits of RERA, each stakeholder stands to gain in diverse ways. To begin with, the process of buying a home is going to be much easier. As per the Act, it is compulsory for every state, and Union Territory (UT) to have its own Regulatory Authority (RA) and frame regulations and rules according to its provisions. This authority shall notify the various regulations covering both residential and commercial projects, within the state or the UT. It will also allow for the speedy redressal of disputes between buyers and developers and help in enhancing the trust between the two. Moreover, developers will not be able to sell or book apartments without a commencement certificate (CC) from the concerned authorities, thereby weeding out unreliable builders and making space for the reliable ones to flourish.
Under RERA, real estate developers will have to maintain a separate account for every project undertaken wherein 70 per cent of the money received from the buyers shall be deposited, to be used only for the purposes of construction and land cost. They will also have to furnish additional information regarding ongoing projects for the benefit of the buyers. Further, in case of delays both developers and buyers will have to pay the same penal interest of SBI’s Marginal Cost of Lending Rate plus 2%. From now on, developers will have to make public the original sanctioned plans and changes made later, total amount collected from allottees, money used, original timeline for completion, and the period within which the developer will complete the project, certified by an Engineer/Architect/practicing Chartered Accountant. Compulsion on sharing such key details will help developers to flag off loopholes or gaps that sabotage their project.
Since the Act seeks to empower home buyers and safeguard them from withstanding the worst of unnecessary project delays, it will increase their confidence of investing in a home. This will lead to a rise in demand for housing across the spectrum. While developers can now ensure smooth and timely transfer of homes into the hands of its rightful owners, lenders could witness a rush of borrowers looking for an attractive loan offer. At the same time brokers could cash in on through commissions, through an increased scale of consumers that will now be willing to put their money in real estate.
RERA as a necessity
This landmark Act was a necessity for several reasons. Untimely delivery of projects has been a financial bane for both the home buyer and the real estate developers. RERA brings in the much-needed relief to the home-buying experience, considered to be one of the major decision of a person’s life. That developers will now have to constantly furnish additional information regarding the ongoing projects for the benefit of the buyers, instills a renewed sense of trust among consumers. This will be indirectly responsible for bringing more investments in the sector, for the supply to match up with the impending rise in demand for housing. Consumer confidence shall be further reinstated with RERA coming to their rescue in case of any structural or defect in workmanship, quality or provision of services or other obligations within a period of first five years of the agreement. The responsibility to rectify such defects lies with the developers, and is to be done free of cost, within 30 days of the consumer bringing it to their notice.
A regulated market organises business processes in any sector. In addition to RERA, if gaps in easy access to land, financing and reducing the cost of construction are addressed, it will truly strengthen the real estate sector.