Under the Real Estate (Regulation and Development) Act (RERA), which came into force on May 1, 2017, real estate agents will need to register themselves, to be able to facilitate a transaction. The broker segment in India, is estimated to be a USD 4 billion industry, with an estimated 5,00,000 to 9,00,000 brokers. However, it has traditionally been unorganised and unregulated.
According to Shubhika Bilkha, business head, the Real Estate Management Institute, “In more advanced markets, real estate brokers or agents need to register, be verified and certified, in order to facilitate a real estate transaction. As India’s real estate industry prepares for increased regulatory vigilance, organising this essential and yet, largely overlooked segment, in line with global best practices, is required. This will improve the overall transparency and accountability in the sector.”
How will the inclusion of brokers under RERA, impact the industry and the buyers?
Once brokers are managed under the RERA regulations, investors’ and home buyers’ trust is likely to increase and this could lead to an increase in sales and revenue for both, brokers and builders.
Anil Pharande, chairman, Pharande Spaces says, “It will go a long way in cleaning up the sector and making it more attractive for all stakeholders. Customers will now be protected on all fronts and can make their purchase decisions with a lot more confidence.”
RERA to make real estate brokerage more professional
Sam Chopra, founder and chairman of RE/MAX India, maintains that agents are important stakeholders and it is an excellent move to bring them under the ambit of RERA.
“It will bring a lot of accountability in the industry and the ones who believe in professional and transparent business, will reap all the benefits. Now, the agents will have a much larger and responsible role to perform, as they will have to disclose all the appropriate information to the customer and even help them chose a RERA-compliant developer,” says Chopra.
Gaurev Kapur, managing director of Golden Bricks, points out that “Home buyers and investors put their hard earned money in properties, trusting the brokers and the builders. Unfortunately, some brokers sell properties where the title is unclear or the property is disputed, merely for their own financial gain. With RERA, all this cheating will come to an end.”
With RERA in force, brokers cannot promise any amenities or services that are not mentioned in the documents. Moreover, they will have to provide all information and documents to the home buyers, at the time of booking. Consequently, RERA is likely to filter out the inexperienced, unprofessional, fly-by-night operators, as brokers not following the guidelines will face hefty penalty or jail or both.
Are brokers ready for compliance under RERA?
So far, only around 70 brokers have registered themselves. Even the states are not ready with the infrastructure and resources, to implement RERA. “Brokers, especially the smaller ones, are worried about the increased cost of compliance, which will eat into their profits.
“Now, this sector will become an untenable marketplace for freelancers and part-time operatives because brokers will no longer be able to afford to operate without an institutional framework,” explains Pakshal Sanghvi, director, Sanghvi Realty.
Another issue, is that there is no time-frame for brokers to register themselves, or a body that could train and certify the brokers on guidelines. Shammi Sethi, director of Rare Earth, a real estate consultancy, feels that while it is a great idea to have a proper system, brokers’ interests should also be kept in mind.
“A lot of brokers do not have a clarity on the Act and are confused. It would take the brokers some time, to understand and abide by the norms, but in a few months, when things get clearer, I think it should be good for all,” he says.
Success will depend on implementation
Experts point out that the success of the RERA, will depend on its implementation. The central government, hence, should monitor its implementation in all states and ensure that there is no dilution of the draft rules proposed by the government. Moreover, many states are yet to form their respective regulatory authorities, where an agent can register himself. Several industry stakeholders are also demanding a drastic reduction in the penalty imposed on agents in case of default, since the brokers’ commission is only 1-2 per cent of the entire sales value.
|Registration fees for RERA
Rs 500 to Mahaonline for Maha-Rera website (plus taxes and bank charges, if any).
Rs 10,000 for individual, proprietor, or proprietorship firm.
Rs 1,00,000 for partnership firm, society, private Ltd/Ltd company, LLP, etc.
|Book of records
The agent shall maintain book of accounts, records and documents, separately for each real estate project.
|Registration time frame
The authorities shall deliver the registration number, along with the certificate, within 30 days from the date of registration.
|Validity of registration/renewal
Valid for five years. Renewal to be done at least 60 days prior to the expiry of the registration.
The registration certificate should be displayed at the place of business.
All advertisements, marketing, selling or purchase papers, should have the registration number.
|Penalty on unregistered brokers involved in registered projects
Rs 10,000 per day during the period of failure and a maximum of up to 5 per cent of the value of the deal or project value.