Q) What were the reasons to introduce Real Estate (Regulation and Development) Act (RERA)? Did it achieve its objectives? (150 Words)
Source: The Indian Express OPED: Cooperate for the consumer
Introduction: Real Estate Regulatory Authority(RERA), 2016 was enacted by the Indian Parliament for regulation and promotion of the real estate sector and protecting the interest of consumers. Before its implementation the Real estate sector had been a source of black money and had largely remained unregulated, with no standardization of business practices and transactions.
Reasons for its Introduction: To bring Transparency and accountability in the system in following aspects:
a. Consumer Protection: There were no regulatory mechanisms for real estate markets, such as SEBI for securities. It was essential that such an organization exists which monitors the Advertisement and prospectus issued about the project, Details of apartments etc. and ensures the authenticity of Registered agents and consultants.
b. Introducing transparency: Details such as Profile and track record of promoters, Details of litigations on the project site and the developer, Financial details of the promoters, status of approvals and projects etc. were not known to the consumer earlier. This rendered the consumers clueless about the status of their houses.
c. Removing diversion of money: A regulatory agency was required that keeps a check that the money collected by the home buyers is used judiciously and is not diverted.
d. Addressing Delays: The developers delayed the project completion. Often these were caused by lack of fund created due to diversion.
e. Prevent black money: Such an agency can register home buyers as well as developers and thus can keep a check on cash flows.
f. Reinsure Trust in Real estate Market: With this it aimed that consumers can confidently invest in new houses.
g. Boosting real demand: Once these objectives are met, the real estate bubble which was created on the back of black money could be controlled, which could make the real estate cheaper for real buyers.
Objectives achieved with RERA:
a. Regulation: It has infused governance in a hitherto unregulated sector.
b. Cleanse the sector of Black money: Along with demonetisation and GST, it has, to a large extent, cleansed the real estate sector of black money.
c. Protection of consumers:
i. Prevents diversion of funds: Promoters are required to maintain “project based separate bank accounts”
ii. Tackles the mayhem of deceitful advertisements as advertisements can be made only post registration with RERA.
iii. Compulsory Registration: It stipulates that no project can be sold without project plans being approved by the competent authority.
iv. Model agreement with mandatory disclosure of unit sizes based on “carpet area” and the expected date of completion.
v. Interest on Default by developer too: The provision for payment of “equal rate of interest” by the promoter or the buyer in case of default reinforces equity.
vi. Transparency: The operationalisation of a web-portal for project information, which is at the heart of ensuring full project transparency, has been operationalised by 26 regulatory authorities.
d. Successful Implementation:
i. 30 states and Union territories have set up real estate regulatory authorities, 26 have set up appellate tribunals and 34 have notified the rules.
ii. Around 60,000 projects and 45,000 real estate agents have been registered with regulatory authorities. Further, about 60,000 complaints have been disposed-off till now.
e. Boosting Confidence: Buyers are more confident of their purchase now.
f. Boosting business: developers are now viewing the RERA registration tag as a branding tool and proactively registering their projects to attract buyers and flexible financing facilities.
Thus, this arrangement is leading to a win-win situation for all the stakeholders. However there are certain limitations in its implementation too.
Shortcomings of RERA:
1. Non-compliance: Still many old projects are running outside the regulatory oversight of RERA.
2. Resolution of Unviable Projects: There are various projects that have stopped and have become unviable by now. The Act or the rules are insufficient to resolve such projects by liquidation or any other mechanism.
3. Lacks adequate powers: It cannot exercise its power over all stakeholders of the real estate market particularly the government agencies and authorities responsible for approvals/certificates etc.
4. Multiplicity of Portals: all state governments should develop a single window for registration and processing of applications related to this act instead of current practice of different portals for each state.
5. Delayed decision making: The decision making process is still slow.
6. Few states are still outside its ambit.
Conclusion: RERA has been instrumental in its ability to create awareness and bring transparency. However, Its future success will depend on its effective and uniform implementation across India. A uniformly regulated environment will instil trust and strengthen business conditions. This can further enhance ease of 'doing business' in the real estate sector. Taking a cue from the rapid progress within the first two years, this could soon be a reality.