In India, real-estate sector is highly unorganised, even the status of industry is not been given to this sector. In any developing nation, the real-estate sector is the backbone of its development. Since independence there was no regulatory authority of real estate sector, because of which lots of instances of miscommitments, cheating comes into notice.If you see the number of cases pending before the consumer disputes forums in India you can easily figure out ahigh percentage of complaints relating to Real estate sector.
As an awakening call, finally the government has introduced new machinery of regulation of real estate sector in the form of introducing Real Estate Development Act 2016 under which every state a Real Estate Regulatory Authority (RERA) is established. Nowit’s almost going to be 2years of RERA, so here is report on RERA since its applicability.
- Most of the states have notified RERA Act:-
It’s now 2nd year that in India, RERA is notified, almost 24states has notified the RERA(in India there are total 29states and 7union territories), however RERA is not applicable to the state of Jammu and Kashmir therefore effectively 28states comes into the ambit of RERA, 4 north-eastern states has not yet enforced RERA because of the land issues thatmany lands in these states belongs to the tribal communities. All the 7 union territories has applied and notified the RERA.
- Working Capital Needs of Developers Increased leads to project launches slow down:-
Under RERA the developers working capital needs have increased because of which a decrease in project launches can be seen.Only those developers seems to be active who are having enough funds and have commitment to complete the construction within the given timelines. Since RERA stipulates the need of escrow account for keeping the funds of the specific project in separate bank account, withdrawals on the basis of the percentage completion method , prescribed penalties in case of violation of RERA provisions makes the things more tough for developers.Now the things cannot be taken for granted by developer. In nutshell, post RERA the real-estate industry is quite slow with only new project launches by strong financially backed builders.
- Professionals like CA’s and Architects more sceptic on issuing certificates:-
RERA has imposed great burden on developers to get certificate from the chartered accountant and architect, then only money shall be allowed to get releasedfrom the escrow account for further development. Since the certificate are issued on the basis of percentage of completion method, in first instance the architect issues certificate then on the basis of that Chartered accountant issues the certificate so it is a great responsibility on the shoulders of professionals to observe high level of due diligence before issuing certificates and not to favour the developer in any way.Moreover, the penalties on the professionals are also imposed if they compromise with their due diligence report.It will promote a high level of transparency by the professionals and will discourage malpractices’ of false certification by them.
- Setting up of RERA Appellate Tribunals have been started:-
RERA Appellate authority is the authority where any person aggrieved of the order of the RERA can file appeal against the orders of RERA.Since, RERA is a new law, the applicability of RERA tribunal was not the reality in many states but now the benches of RERA tribunal has been constituted by most of states.
- Orders under RERA practically not enforced in every state:-
It has been seen in many states that complainants are getting relief orders under RERA but practically in many cases there is no clear cut mechanisms available for execution of those orders which is expected to be inline within next one year or so. But where the relief sought is not in nature of monetary compensation like cases of poor/ fault in construction quality there it has been seen that things have really worked due to RERA orders.
- Mediation Benches of RERA are on the way for getting existence:-
Across many of states, process of appointment of mediation experts/consultants is going. For instance in Uttar Pradesh, recently authority has made appointment of experts/consultants for mediation benches on the honorarium basis where as in Maharashtra they have already setup its mediation benches.
- Speedy delivery of projects:-
Since RERA stipulates the late delivery penalty that is a same rate of interest has to be paid by the builder as builder charges to the buyer in case of late payment of instalment of property, this added up a good pressure on builder lobby that speedy construction and focus on possession can be improved.
Disclaimer –This article is for the general information and awareness of its readers, in-case of any legal matter in relation with readers, they are expected to have legal opinion before placing reliance on it. Further it contains completely author’s views on the subject and completely unbiased based on authors own experience, study and understanding.
About Author:-Rajul Jain (CA, MCOM, LLB, MBA, CNPO, CPFA, NCFM) is Chartered Accountant and Legal Consultant, academically he is highly qualified and have gone through various certifications. He extensively speaks and writes on finance, taxation and legal matters. The author can be reached at [email protected]