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Although the Real Estate (Regulation and Development) Bill, 2016 was passed by Parliament in March 2016 and all the 92 sections of the Act come into effect from May 1, only 13 states and union territories have so far notified the rules.
The states that have notified the rules are Uttar Pradesh, Gujarat, Odisha, Andhra Pradesh, Maharashtra, Madhya Pradesh and Bihar. The Housing Ministry had in 2016, notified the rules for five union territories – Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu and Lakshadweep, while the Urban Development Ministry came out with the rules for the National Capital Region of Delhi. The other states and UTs will have to come out with their own rules.
The Real Estate (Regulation and Development) Act (RERA) promises to bring in the much-desired transparency, accountability and efficiency in the real estate sector and the government has described the implementation of the Act as the beginning of an era where the consumer in king. Speaking to reporters in Hyderabad, union minister Venkaiah Naidu said, “This is a landmark legislation, becoming a reality, nine years after regulation of the real estate sector was first mooted in 2008. I have assured all concerned that the Bill only enables regulation of the sector for the benefit of all and not strangulation. I only insist that the developers must fulfil their promises to adhere to the promises made in the advertisements.”
According to Naidu all efforts were made to delay this legislation from becoming a reality. The minister said the government had gone beyond the recommendations of the select committee and further improved upon the earlier Bill. “While the select committee recommended that 50 per cent of the money collected by the developers from buyers be deposited in a separate bank account to prevent diversion of money to other projects, we have increased this to 70 per cent. We have made the Real Estate Act applicable to projects with a minimum plot size of 500 sq metres or eight apartments, while the proposal in the UPA’s Bill was to apply it to plot size of 4,000 sq metres and the standing Committee recommended its application to plot size of 1,000 sq mt or 12 apartments,” Naidu said.
As against the original proposal of bringing only residential projects under the ambit of regulation, now, it has been made applicable to commercial projects also. The Act says that developers shall refund payments to buyers within 45 days of becoming due, he added.
Delays, dilutions of the central Act, a cause of concern
He said 13 states and UTs have already notified the Real Estate Rules as required under the Act. “Given the implications for the large number of buyers and for the sector as such, I am confident that all states and UTs would do the needful, to enable the buyers exercise their rights as required, failing which they will face adverse consequences from the public and the courts as well,” Naidu added.
Under the Act, the developers will now have to get the ongoing projects that have not received completion certificate and the new projects registered with the regulatory authorities, within 3 months from May 1, 2017.
A Housing and Urban Poverty Alleviation (HUPA) ministry spokesperson said the ministry has been taking up the matter with all the states and UTs for implementation of the Act, requesting them to ensure action as per the provision of the Act within the time limit. The ministry had earlier formulated and circulated the model rules to the states and UTs for their adoption and it is their responsibility to notify the rules, the spokesperson said. Those states which have not notified the rules will face public pressure and even people could approach the court in the matter, he added. On reports that key provisions have been diluted by some states, he said it was pointed out to those states and they have assured the ministry that it would be corrected. The Indian real estate sector involved over 76,000 companies across the county.
Major provisions of the Act
- Some of the major provisions of the Act, besides mandatory registration of projects and real estate agents, include depositing 70 per cent of the funds collected from buyers in a separate bank account for construction of the project. This will ensure timely completion of the project as the funds could be withdrawn only for construction purposes.
- The law also prescribes penalties on developers who delay 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 home buyers, said Ramesh Nair, CEO and country head, JLL India.
- 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, he added. If the promoter fails to do so, the aggrieved allottee is entitled to receive compensation under RERA, Nair said.
- Other highlight of the Act is imprisonment of up to three years for developers and up to one year in case of agents and buyers, for violation of orders of appellate tribunals and regulatory authorities.
Real estate industry welcomes the beginning of RERA
As per industry data, real estate projects in the range of 2,349 to 4,488 were launched every year, between 2011 and 2015, amounting to a total of 17,526 projects with investments of Rs 13.70 lakh crores in 27 cities, including 15 state capitals. About ten lakh buyers invest every year with the dream of owning a house.
Real estate industry bodies CREDAI and NAREDCO said the implementation of this law will bring a paradigm change, in the way Indian real estate functions. They expect property demand to rise but supply may get affected in the near term. “It will protect buyers who have purchased flats in the past. The regulator under the RERA, should find ways to help complete ongoing projects and provide relief to home buyers,” NAREDCO chairman Rajeev Talwar said.
CREDAI president Jaxay Shah said RERA will increase transparency in the sector and boost confidence of both, domestic and foreign investors. He, however, said there will be some teething problems initially, in the implementation of this law.
Asked about the impact on prices, Shah said, “Supply will dip during this year but demand will improve, as buyers will have increased confidence about investing in the property market.” The real estate prices will remain stable now but rates could rise by 10 per cent in the next six months, he added.