What is the RERA effect on real estate

For the longest time, property has been considered one of the smartest investments. That said, the real estate market was skewed in the interest of developers. All of that changed with the Real estate Regulation Act (RERA). The act was passed in 2016 and since then has brought about a lot more transparency in the buying and selling of property. There is still though a long way to go. Let’s take a look at some of the achievements so far.

Project Registration

When you’re investing in a new construction, you’re usually putting your money down without seeing the house or apartment in person. You’re paying for a vision and unfortunately, many people have been cheated and sold homes with a smaller carpet size, etc. Not everyone understands the difference between carpet area and built up area or super built up area and this was something many developers took advantage of. One of the most visible RERA effect on real estate has been the result of legislating a need for all projects to be registered. Ant real estate project with more than 8 apartments or a development area exceeding 500 sq mts must be registered with all details such as carpet size, promoter details, land status, completion schedule, etc. As a result, there’s a much lower risk now of being cheated of your investment. If you pay for a 800 sq ft 2 BHK in a RERA approved project, the developer must hand over the same to you within the stipulated time.

Transparency in Timelines

While everyone knows, constructing a building takes time, you still need to have a finite timeline. Before RERA, handovers were often delayed and home buyers often had to wait for years rather than months to move into their homes. Today, developers are held responsible for the timelines provided at the time of project registration. Since they are liable to heavy fines for delayed handovers, the timelines provided are more realistic and projects are completed on schedule.

Better Quality Construction

In real estate, RERA has become a turning point. There’s before RERA and after RERA. One of the less talked about effects of RERA has been an improvement in raw materials used for constructions. RERA made developers and builders responsible for any and all structural defects that appeared within the first 5 years of construction. Not wanting to have to re-do things or fight cases in court, developers and builders have started using better quality cement, bricks, plaster and other related materials.

Fewer Unsanctioned Alterations

The RERA guidelines for buyers state that buyers must approve of any alterations to the initial construction plans in the apartment they are purchasing. If there’s an alteration to be made in the common areas or the project’s overall layout, the changes must be approved by at least 2/3rd of the total buyers. So, while there is still the odd case of a home buyer walking into an apartment with a beam in places they did not know about earlier, the frequency of such occurrences is much lower.

Unified ownership laws

Until the RERA Act was passed, states had their own laws regarding the selling and purchasing of real estate. This caused confusion especially with people often buying property in different states. RERA unified the real estate laws and created a common ruling according to which all sales could be compared. This brought abut transparency and made buyers more confident about tehir investments.

Grievance Redressal

The Standard Sale Agreement after RERA puts power in the hands of home buyers. Any homebuyer can lodge a complaint against a developer or builder. If the person isn’t satisfied with the way his/ her complaint is handled, they can raise the issue at the Appellate Tribunal. It can even go as high as the Supreme Court. According to data from the Ministry of Housing and Urban Affairs, as of May 1, 2021, about 66,779 cases have been disposed across the country. That’s 66,779 home buyers who are now satisfied with their property purchases. However, the number is not distributed evenly across all states. As per RERA news, states like Assam and Hyderabad still have very few disposed cases. Telangana has 0 cases disposed so far. Even in the states that have cleared most cases, home-buyers are yet to get their dues from the concerned developers and builders.

Improving the effectiveness of RERA

While states like Maharashtra have taken long strides towards making RERA effective, others have been slower to adopt the new measures. The slow execution and lackadaisical attitude has effected the overall efficacy of RERA. It is only when every state does its part that the state of the national real estate market will improve. Here are some of the measures that need to be taken.

Maintain updated RERA websites

With everything else going digital, the approach to RERA needs to be digitized too. There are still a few states that have not launched websites. These websites need to provide home buyers with details such as project status and latest updates. So, it isn’t enough just to have a website, the content on these websites also needs to be updated regularly and it needs to have a consumer-friendly interface.

Holding governmental agencies accountable

When a project is delayed, RERA penalizes the developers and builders. However, the fault is not always theirs. Government agencies responsible for clearances and approvals have no accountability. If a project is delayed because it could not be cleared in time, the penalty falls on the developer’s lap. This loop hole needs to be addressed and stringent policies must be included to streamline the granting of approvals so projects can follow the intended timeline.

Single window clearance

Documentation still has a long way to go before it can be processed smoothly. There are over 50 approvals and clearances required just to get a project started and developers have to approach different departments for each certificate. The system is slow and inefficient. In many cases, it takes a year just to get the documentation in order. Some states have brought about a single-window clearance system and have seen positive results. The system now needs to be taken nationwide. When developers can get timely approvals, projects can be sold on time and subsequently completed in time.

Pricing visibility

Pricing is the one aspect of buying property that RERA does not seem to have addressed until now. Buyers can see the project registration and status details on the RERA websites but they still need to visit individual developer websites to find out the cost of investing in a project. It would be beneficial for them if at least an indicative price was mentioned at project levels.

Keep states from diluting RERA provisions

By leaving RERA open to interpretation, several provisions are being diluted by the states. For example, central RERA states that 70% of the amount received from buyers must be deposited in a separate account. This money can be withdrawn in proportion to the project completion status. However, several states have diluted the withdrawal provision. Similarly, tehre is no clear definition of structural defects that the builders are liable for. These differences need to be addressed and all states need to follow the same policies for RERA to be effective.

A final word

RERA has proved to be a smart move and put developers and buyers on an equal footing. But, there’s still a way to go before it achieves it’s true aim. The effect has not been as powerful as it was imagined since each state is approaching it in its own way. There is potential and with a push to speed up processing, RERA can bring about mush more transformation and uniformity in the real estate sector. To achieve this, the state and central government must work collectively with a common aim.

Times property is a digital one stop shop for genuine residential and commercial property listing and information that can help property buyers. It is part of Bennett & Coleman Ltd (Bccl).