RERA or Real Estate (Regulation and Amendment) Act, 2016, is being seen as a game-changer by many. Experts feel this is the first time that real estate buyers will get a specific law protecting their interests. Reason: this is the first time that the do’s and don’ts have been clearly marked for both sides – the buyers as well as the developers.
“RERA will definitely infuse a badly-needed dose of confidence and buyer sentiment into the real estate sector. Buyers in many regions have been victimised by the dubious practices of certain unscrupulous builders, locking their life savings into vastly delayed projects or even into complete dead losses. This uncertainty will now come to an end,” says Ashwinder Raj Singh, CEO – Residential Services, JLL India.
With several states drafting rules for the Act, the onus would solely be on the developer to deliver a quality project.
“RERA is not fully implemented right now and if the machinery provided under the Act is not going to be provided for then it is not going to help much. If the system under the Act is in place, this will definitely help,” says Narendra Kumar, Supreme Court lawyer and a RERA expert.
RERA puts the burden on the developer for providing and maintaining essential services, at reasonable rates, till a society association is formed. But these directions are for new projects. What about projects that have been delayed before RERA came into the picture?
“There would be cases where people have paid 90 percent of their hard-earned money but on the ground, only the structure is standing or nothing at all. If tomorrow a builder pleads that he is not in a position to do anything or declares himself insolvent, who will fill in for him? This is a grey area where the government must step in,” says Kumar.
There are many states that will not enforce RERA with retrospective effect. The industry feels there are gaps in the law which are too conspicuous to be ignored. For instance, it is not clear whether RERA applies to under-construction units as well. The central rules state that these would apply to under-construction units. But, can existing projects comply with retrospective legislation? Can’t buyers circumvent the new system as far as old units are concerned?
“The problem is that some fly-by-night developers took buyers for a ride. They siphoned off their money and delayed projects. The situation had come to such a pass that the government had to step in,” says Sarvpreet Gurna, lawyer in Punjab and Haryana High Court.
“The system became rotten because, in the past decade or so, developers never targeted the buyer. They always targeted the investor. Instead of delivering the projects, they looked for ways and means to make more money, thereby, ignoring the gullible buyer. The problem had assumed monumental proportions,” says Kumar.
Under RERA there is a provision that if one builder exits the project, another developer can fill in for him. “But for old projects where the money has already been frittered by the developer, there is no incentive for any builder to complete the project. Who will foot the bill?” asks Kumar.
“RERA will up the consumer confidence and bring a much-needed transparency into the sector but the litmus test for the government would be how it handles the old projects,” adds Gurna.
“The RERA-compliant projects would be a little costly but it will increase consumer confidence and further drive the real estate market. If a project guarantees the security of the money then a consumer doesn’t mind paying a little more,” says Pankaj Singh of Chanchal Associates, a property brokerage in East Delhi’s IP Extension area.
“Compliance-related price escalations are to be expected once RERA is implemented across the country,” says Singh of JLL.
So, when should a consumer invest into a project? “The period after the nationwide implementation of RERA will be ideal for any fresh investments in residential real estate. Even before that, it is a good idea to invest in properties by sound, reputable developers,” further adds Singh.