Two years after the Centre notified the Real Estate Regulation and Development Act (RERA) of 2016 to empower and protect property consumers and make property transactions fair and transparent by regulating the sector, the sluggish and flawed implementation of the progressive act, has put a big question mark on the gains of RERA.
RERA was passed by both the houses of Parliament in March 2016 and on May 1, 2016 a majority of the sections of the Act came into force. Under this model Act, every state was required to set up its regulatory authority within a year (by May 1, 2017). And in the next one year, the states were mandated to make their RERA websites operational for the benefit of home buyers. Other sections were notified in April 2017 and on May 1, 2017 the full act became operational.
Today, two years after RERA became an Act, only 20 states have notified rules. What's more, except for the states of Maharashtra, Punjab and Madhya Pradesh, which have permanent regulators, all other states are making do with interim regulators.
Under RERA, all developers need to register to launch projects, which get registered only after all necessary permissions and land for the project are in place. They are required to provide all the mandatory information to be up on the official website of RERA to help buyers take an informed decision about buying property.
RERA's performance on this front is also dismal as 15 states are without an operational RERA website. Even on the functional websites, the projects information is either incomplete or questionable, with no way to check its authenticity. As a result of the weak and faulty implementation of RERA, home buyers are deprived of the gains and protection guaranteed under the Act.
Notwithstanding the criticism about flawed and slow implementation of RERA, this progressive regulation has helped in project execution and delivery, boosting demand and sales, in turn contributing to the revival of residential real estate, though the gains are limited.
As RERA takes root -- along with low interest rates, stable property prices and the government's loan subsidy for affordable housing -- its positive impact is already visible. There has been an eight per cent hike in housing demand in Q1, 2018, compared to Q4, 2017. Home sales registered a 33 per cent rise in the top nine cities during this period. In fact, housing sales exceeded new supply by five per cent during the last two years.
It's another matter that buyers have so far not developed complete confidence and prefer ready homes to avoid development risks. The preventive and penal provisions of RERA have made developers focus on deliveries, readying a good pipeline of completed homes for sale.
Besides various other factors, fund constraint has been the prime reason for large-scale delivery defaults. But RERA, aided by other key reforms like GST, FDI liberalisation, ease of doing business and demonetisation, have brought in much-needed transparency, fair play and financial discipline by regulating realty, in turn giving a boost to the confidence of global investors.
Statistics speak for themselves. PE investments witnessed 52 percent rise since 2014. PE investments grew 17 percent in 2017 to Rs 42,800 crore, as against Rs 36,590 crore last year, with residential realty attracting highest investment of Rs 15,600 crore.
RERA, besides empowering and protecting consumers, has put grievance-redressal on the fast track. It was following the enactment of RERA that a group of aggrieved home buyers could directly approach the National Consumers Dispute Redressal Commission (NCRDC), thereby bypassing lower consumer courts to ensure fast-track justice. It is also because of RERA that the government, development authorities and the judiciary have become pro-active in coming to the rescue of aggrieved home buyers of stalled projects.
The much publicised cases of Jaypee Infratech and the Amrapali Group are cases in point where developers are facing the ire of about one lakh home buyers. In both cases, the companies are staring at insolvency and the Supreme Court has come down heavily on the errant developers, saying it is committed to safeguard the interests of home buyers in terms of project completion and refunds.
Meanwhile, it is also the result of the pressure created by RERA that home buyers are set to get relief under the Insolvency and Bankruptcy Code (IBC) as the government plans an ordinance to treat home buyers as financial creditors to facilitate refunds.
Considering the pros and cons, RERA needs to cover a lot of ground for its effective implementation, in order to serve its desired purpose. And according to Dr Samantak Das, Chief Economist, Knight Frank India Property Advisory, in the current scenario, the sentiment that drives the purchase of residential property is unlikely to change. He may sound too negative. But one thing is certain: The patchy implementation of RERA has delayed the revival of real estate, especially residential realty.
Gautam Chatterjee, Chairperson of the Maharashtra RERA, the front-runner in the implementation of the Act, believes that this "transition pain of RERA" may last at least a couple of years. And Anuj Puri, Chairman of Anarock Property Consultants, sums up the scenario well, saying that although real estate recovery under RERA will be gradual, yet it will be extremely durable -- and based on very sound market dynamics.