RERA in the NCR: Can the states’ rules protect home buyers?

The Real Estate (Regulation and Development) Act (RERA) has had a difficult birth and seems to be having a troubled childhood. The expectations from the ‘miracle child’ seem to be mired in a ‘what’s changed?’ feeling. State governments, on their part, appear oblivious to the reasons for bringing in such a revolutionary piece of legislation in the first place.

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Intent of the RERA

One of the main problems is that different states have interpreted and enacted their own versions of the central RERA. Nowhere is this problem more manifest than the already notorious NCR residential markets. The National Capital Region (NCR) has, for long, been the largest market in terms of absolute volumes of launches, as well as sales. Its share of both, pan-India launches and sales during 2010-2013, was 45 per cent, respectively. During 2014-2015, new residential project launches in the NCR accounted for 33 per cent of the pan-India supply of new units, while its contribution to sales was 28 per cent during this period. It is only over the last 18 months that the NCR’s share of launches and sales has declined to 10 per cent and 20 per cent, respectively.

However, the collusion of some unscrupulous developers and the authorities, has led to major concerns for buyers, who believed that the RERA’s enactment would give them a stronger voice and address all their grievances. RERA came about primarily due to the problems being faced by existing buyers. Therefore, it stands to reason that the Act should first seek to address existing buyers’ concerns and also create a protection mechanism for new buyers.

It is here that the states, particularly Uttar Pradesh and Haryana, have let down the buyers. These states have diluted RERA’s main provision – the definition of ‘ongoing projects’ (in other words, the section that pertains to the coverage of the Act).

Divergence between the central act and states’ RERA rules

The central Act defined ongoing projects, as those which have not yet received their completion certificates. The completion certificate is a vital document, which certifies that a project has been developed according to the sanctioned plan, including layout and specifications, as approved by the competent authority under the local laws. It is far more relevant than the occupancy certificate, which merely certifies that a project or its phase is fit for habitation, with basic infrastructure such as electricity, water and sanitation.

Both, Uttar Pradesh and Haryana, have adopted a definition that is more exclusionary than inclusive in nature. In both states, all ongoing projects which have completed developments works and have applied for completion certificates are currently excluded from RERA coverage, unless their applications are rejected. In fact, UP has exempted projects where 60 per cent of sale deeds have been executed, while Haryana has exempted projects with even partial completion/occupancy certificates. This means that projects with multiple towers, of which some have been completed but project-level amenities are not yet in place or are delayed and where even possession was delayed, are out of the purview of RERA.

Will the RERA have any meaningful impact in the NCR?

A spate of developers had applied for completion certificates, between October and November 2016 and received them over the subsequent months. Over 21,000 apartment units were completed in Noida and Ghaziabad over the past six months and another 7,500 were completed in Gurgaon. Many of these were in projects where common facilities were not fully completed and handed over to the respective RWAs (residents’ welfare associations).

For a residential market that has one of the worst track records for completion timelines and has been the venue of innumerable consumer disputes on quality, unfulfilled promises and delays, this is another missed opportunity for the NCR real estate market to set the record straight. While no one disputes that there are some bad real estate developers, this does not negate the fact that there are also highly reputed and very credible players, who have created a distinctive brand on the back of quality, accountability, customer-centricity and fair business practices.

While the whole premise of RERA is to give affected buyers a forum to air and seek redressal of their grievances, not every consumer complaint will result in an unfavourable judgement against genuine development companies whose projects have been delayed, because of unforeseen circumstances beyond their control. For all consumer complaints, the relevant RERA tribunal will weigh the facts of the case and give due heed to genuine issues of such developers.

Dilution of RERA: Undoing the damage

A spate of recent rejections of applications for completion certificates in Noida and Ghaziabad, seem to indicate that the UP regulatory act is likely to change and follow the central law more closely. Haryana is also expected to seek expert advice, after protests from buyers against the diluted provisions.

Definitely, the central RERA tenet, of projects which did not have completion certificates by the July 31, 2017 deadline being covered under the Act, should be adhered to in the spirit of this legislation. The NCR real estate market needs to see a decisive end to the past practices, which signaled collusion between shady developers and authorities.

(The writer is associate director, research and REIS, JLL India)

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