Dilutions threaten RERA’s effectiveness

While the deadline for notifying the final rules under RERA closes in, there is growing apprehension among consumers about its effective implementation. We examine why

The initial euphoria generated after the notification of the Real Estate (Regulation & Development) Act (RERA), on May 1, 2016, is now waning, with increasing doubts over its effectiveness in protecting the consumers’ interests. This disillusionment has been caused by the alleged dilution of the rules, by several state governments, including Gujarat, Uttar Pradesh, Madhya Pradesh, Orissa, Rajasthan, West Bengal, Maharashtra, Karnataka and Tamil Nadu. The Ministry of Housing & Urban Poverty Alleviation (HUPA), has also notified the final rules for the five union territories. Consumer bodies, housing activists and others across the country, have expressed concern over the watered-down, pro-builder versions of the RERA.

Surabhi Arora, senior associate director – research, Colliers International India, agrees that “Several clauses have been diluted or omitted in the different versions of state regulations, such as inclusion of ongoing projects, promoters’ liability on structural defaults, liability of clear titles, imprisonment clauses for various offences, the definition of saleable area, project development in case of lapse/cancellation of registration, etc.”


Other examples of diluted provisions that several states have proposed:

  • While the builder can terminate the agreement of a buyer who defaults on payments, with just a week’s notice by email, he can take six months to refund the money. The centre’s RERA rules, however, say that the builder must refund the money within 45 days and do not stipulate cancellation of the agreement within seven days, in case of default.
  • While the centre’s rules stipulate a fee of Rs 1,000, for buyers filing a complaint against the developers, some states have proposed an amount of up to Rs 10,000.
  • Exclusion of several ongoing projects and the residents of rehabilitated buildings from the ambit of RERA, omission or dilution of clauses relating to full disclosures, court cases, punishment for offending builders, etc., are the other alarming trends.

See also: What is RERA and how will it impact the real estate industry and home buyers?


Differences between the centre’s RERA rules and Maharashtra’s rules

Ramesh Prabhu, chairman of the Maharashtra Societies Welfare Association, points out that the central act requires that all the information about the project and the promoter, collected by the regulatory authority, be made public. “However, this has not been included in the Maharashtra rules. Secondly, as per central act, the conveyance of land in layouts must be done only in the name of the federation, as undivided proportionate land to the association of allotees together or to the allotee. The Maharashtra rule, however, says that the promoter shall convey the structure to individual societies and the conveyance of the land shall be done in favour of the federation, after the receipt of the occupancy certificate (OC) of all buildings. So, if the last building remains incomplete, the conveyance will also be prolonged. The Maharashtra rule also says that the formation of the society shall be done after 60 per cent of the members take possession, whereas, the central rules state that the society has to be formed once 51 per cent of the building is sold,” he elaborates.


What builders have to say about RERA

While there are allegations that the builders’ lobby is pressurising state governments to dilute the provisions, developers maintain that they welcome the act. “Real estate players view RERA as a welcome step that will make the sector healthier for foreign, as well as domestic investors. We hope that the RERA guidelines are set, keeping in mind the interests of the developers, consumers and all other stakeholders and for the eventual benefit of the real estate industry,” says Manju Yagnik, vice-chairperson of the Nahar Group.

Arora adds that the early adoption of the practices mandated in the act, will help developers significantly. “Over time, RERA will weed out speculators in the Indian property market and push it towards maturity. Demand should rise, owing to the positive sentiment among buyers about this legislation in both, the near and long term. Ideally, the state government should not dilute the overall intent of the central regulation, because if it is implemented half-heartedly, the act may not help in protecting consumers’ interests,” concludes Arora.


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