Conditional coverage defies the central RERA Act: CRISIL

MUMBAI: Despite continuous monitoring and follow up by the Ministry of Urban Development and Housing, only nine states and six union territories have notified their respective Real Estate (Regulation and Development) Rules, 2017 and the conditional coverage of RERA defies the central RERA Act, said CRISIL Research.

The central Real Estate (Regulation and Development) Act (RERA) was notified on May 1, 2016, and has come into effect nationwide from May 1, 2017. States were asked to prepare and notify respective rules in tandem with the Act, so it could be effectively implemented.

The states that have notified their RERA rules include Andhra Pradesh, Bihar, Gujarat, Kerala, Madhya Pradesh, Maharashtra, Odisha, Rajasthan, and Uttar Pradesh. Union territories including Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, Lakshadweep, and National Capital Territory of Delhi have also notified their RERA rules.

According to CRISIL Research many states have either diluted a few crucial aspects of the Act, or given insufficient emphasis to its provisions in their rules.

Major points of disconnect:

Definition of ongoing projects: RERA 2016 includes projects that are ongoing on the date of commencement of the Act (i.e., May 1, 2017), and for which the completion certificate has not been issued. However, Andhra Pradesh, Kerala and Uttar Pradesh have altered this definition in their notified rules.

Penalties for non-compliance with the Act: RERA 2016 recommends imprisonment for a term which may extend up to three years, or fine which may extend up to 10% of the estimated cost of the real estate project, or both, in case of non-compliance with the Act. However, most states have added a clause of compounding of offence to avoid imprisonment.

Payment schedule and liability in case of structural defects: According to the central legislation, the model sale agreement is required to specify 10% advance payment, or charge an application fee from buyers, while entering into a written agreement for sale. In addition, in case of any structural defects arising within five years of handing over the possession of project to buyers, developers will be liable to rectify such defects without further charge. However, there is no clarity on these clauses in most states’ RERA notifications.

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