New Delhi/Hyderabad: The much-awaited Real Estate Act comes into force from Monday but only 13 states and Union Territories have so far notified rules under the Act which Union Minister Venkaiah Naidu said will enable only regulation of the sector and not “strangulation”. The Real Estate (Regulation and Development) Act or RERA promises to bring in the much-desired transparency, accountability and efficiency in the real estate sector and the government has described the implementation of the Act as the beginning of an era where the consumer in king.
The government has brought in the legislation to protect home buyers and encourage genuine private players. The Real Estate (Regulation and Development) Bill, 2016 was passed by Parliament in March last year and all the 92 sections of the Act come into effect from May 1.
However, only 13 states and UTs have so far notified the rules. The states that have notified the rules are Uttar Pradesh, Gujarat, Odisha, Andhra Pradesh, Maharashtra, Madhya Pradesh and Bihar.
The Housing Ministry had last year notified the rules for five Union Territories – Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, and Lakshadweep, while the Urban Development Ministry came out with such rules for the National Capital Region of Delhi. The other states and UTs will have to come out with their own rules.
Speaking to reporters in Hyderabad on Sunday, Mr Naidu said, “I am happy that the hard labour put in by the Narendra Modi-led Government to make this Act a reality (fructifies) on May Day. This is a landmark legislation becoming a reality nine years after regulation of real estate sector was first mooted in 2008”. According to Naidu all efforts were made to delay this legislation from becoming a reality.
“Given the importance of this legislation and pressing need to protect the interests of large number of buyers across the country, we took it seriously and began to push it. I have held several rounds of consultations with all stakeholders including consumer federations and real estate bodies and impressed upon them that the real estate sector…will significantly benefit from the regulation,” he added.
“I have assured all concerned that the Bill only enables regulation of the sector for the benefit of all and not strangulation,” he said adding “I only insist that the developers must fulfil their promises…simply adhere to the promises made in the advertisement.”
The minister said the government went beyond the recommendations of the select committee and further improved upon the earlier Bill.
“While the select committee recommended that 50 per cent of the money collected by the developers from buyers be deposited in a separate bank account to prevent diversion of money to other projects, we have increased this to 70 per cent.”
“We have made the Real Estate Act applicable to projects with minimum plot size of 500 sq metres or eight apartments while the proposal in UPA Bill was to apply it to plot size of 4,000 sq metres and the standing Committee recommended its application to plot size of 1,000 sq mt or 12 apartments. As against the original proposal of bringing only residential projects under the ambit of regulation, now it has been applicable to commercial projects also.”
“As per the assurance I gave to Parliament, the Act says that developers shall refund payments to buyers within 45 days of becoming due.”
The minister said this Act is a win-win situation for both buyers and developers. Rights and obligations of both buyers, developers and real estate agents are clearly defined in the Act and any aggrieved party can seek redressal for violation of the terms of agreement by the other party.
All the ongoing projects that have not received Completion Certificate and new projects shall be registered by developers within three months i.e by July end. This mandatory registration of projects with real estate authorities enables grievance redressal in case the builders fails to deliver what was promised at the time of launch of project, he said.
He said 13 States and UTs have already notified the Real Estate Rules as required under the Act.
“Given the implications for the large number of buyers and for the sector as such, I am confident that all states and UTs would do the needful to enable the buyers exercise their rights as required, failing which they will face adverse consequences from the public and the courts as well,” Mr Naidu added.
Under the Act, the developers will now have to get the ongoing projects that have not received completion certificate and the new projects registered with regulatory authorities within three months from Monday.
A HUPA ministry spokesperson said the ministry has been taking up the matter with all the states and UTs for implementation of the Act, requesting them to ensure action as per the provision of the Act within the time limit.
The ministry had earlier formulated and circulated the model rules to the states and UTs for their adoption and it is their responsibility to notify the rules, the spokesperson said.
Those states which have not notified the rules will face public pressure and even people could approach the court in the matter, he added. On reports that key provisions have been diluted by some states, he said it was pointed out to those states and they have assured the ministry that it would be corrected.
The Indian real estate sector involved over 76,000 companies across the county.
Some of the major provisions of the Act, besides mandatory registration of projects and real estate agents, include depositing 70 per cent of the funds collected from buyers in a separate bank account for construction of the project.
This will ensure timely completion of the project as the funds could be withdrawn only for construction purposes. The law also prescribes penalties on developers who delay projects. All developers are required to disclose their project details on the regulator’s website, and provide quarterly updates on construction progress.
In case of project delays, the onus of paying the monthly interest on bank loans taken for under-construction flats will lie on developers unlike earlier, when the burden fell on home buyers, said real estate service provider JLL India’s CEO and country head Ramesh Nair.
RERA also states that any structural or workmanship defects brought to the notice of a promoter within a period of five years from the date of handing over possession must be rectified by the promoter, without any further charge, within 30 days, he added.
If the promoter fails to do so, the aggrieved allottee is entitled to receive compensation under RERA, Nair said. Other highlight of the Act is imprisonment of up to three years for developers and up to one year in case of agents and buyers for violation of orders of appellate tribunals and regulatory authorities.
As per industry data, real estate projects in the range of 2,349 to 4,488 were launched every year between 2011 and 2015, amounting to a total of 17,526 projects with investments of Rs. 13.70 lakh crore in 27 cities, including 15 state capitals.
About ten lakh buyers invest every year with the dream of owning a house. Real estate industry bodies CREDAI and NAREDCO said the implementation of this law will bring paradigm change in the way Indian real estate functions. They expect property demand to rise but supply may get affected in the near term.
“It will bring a paradigm change in the real estate sector. It will protect buyers who have purchased flats in the past. The regulator under the RERA should find ways to help complete ongoing projects and provide relief to home buyers,” NAREDCO chairman Rajeev Talwar said.
CREDAI president Jaxay Shah said RERA will increase transparency in the sector and boost confidence of both domestic and foreign investors. He, however, said there will be some “teething problem” initially in implementation of this law.
Asked about the impact on prices, Mr Shah said, “Supply will dip during this year but demand will improve as buyers will have increased confidence about investing in the property market.”
The real estate prices will remain stable now but rates could rise by 10 per cent in the next six months, he added.