The Real Estate Regulation Act (RERA) went live on May 01st, at least officially. Conceptually, it is a great idea. Empowering the home buyer with greater transparency and protection is definitely a great idea for the long term health of the real estate industry. RERA is supposed to handle practical problems like cost overruns, time overruns, faulty structures, lack of information, legal title problems, lien issues, post hand-over maintenance, regulation of brokers etc. While 2 months may be a very short time to look back at the RERA implementation, there are certainly some key challenges that have cropped up along the way in the first couple of months of its implementation. Let us look at a few of them…
Taking RERA to the next level means overcoming these challenges…
- There is still a dichotomy in the time table followed by states in enacting the RERA Acts. While final rules have been notified by just 15 states, others are still in the process of finalizing the same. Secondly, there is the all-important task for setting up the RERA authority in each state which will function as the central nodal agency for real estate transactions in the state. Most states are yet to appoint the RERA authority even as other states are lagging behind in the creation of RERA website for uploading all relevant information to become RERA compliant.
- The cut-off for regulation by RERA in case of ongoing projects is still not too clear. For example, some states have interpreted the rule to mean that the benefit of not registering under RERA will only be available in case of projects that have obtained completion certificate before May 01st. But some states have interpreted this rule to exempt even those projects that have applied for completion certificate before May 01st. There is still no clarity on this cut-off date, which has created a pall of uncertainty over most projects.
- Even on the aspect of depositing 70% of the deposit money in a separate escrow account, the existing buyers who have booked properties are not very clear about whether this rule should apply to under-construction projects or only projects that commence after May 01st. This is creating a lot of confusion in the relationship between builders and customers.
- There is also the major uncertainty over the re-execution of the agreements in case of projects where the deed is already signed. While some states are calling for all such documents to be re-executed under the RERA, other states are exempting existing agreements from this requirement. This inconsistency across states is proving to be a major source of confusion for buyers of property.
- Even at a customer level, there are still a lot of uncertainties. For example, in the absence of a centralized database of projects and brokers, how do customers find out if the project is registered or not. Alternatively, how do customers know if the broker in question is registered under the RERA or not, since in both cases the comprehensive database is not available for public viewing?
- There is also a high degree of confusion among brokers and distributors on the aspect of marketing of projects to customers. Aspects like restrictions on creation of builder micro-site, restrictions on selling, KYC etc are still not too clear. Many large corporates have planned a major foray into real estate broking in the aftermath of the passage of RERA. But many of them are currently trading cautiously as there are lot of unresolved issues pertaining to how they should market the projects and to whom they can market the projects.
It needs to be said that the RERA is probably facing teething problems which is natural in case of any legislation of this magnitude and importance. It must be said to the credit of this government that it has taken the initiative to bite the bullet on the subject of regulating real estate in a more realistic and meaningful manner. This was on the cards for a long time but institutionalization of the real estate was never really happening. From that perspective, India has surely made a good start in that direction. One only hopes that these small issues will get ironed out along the way. A lot will depend on the pace at which the states push their RERA agenda through and the extent to which they secure developers buy-in for the project.