In this article, Arpit Srivastava discusses Importance of RERA (Real Estate Regulatory Act) and its possible effect on real estate sector.

RERA (Real Estate Regulatory Act)

The much-awaited Real estate (Regulation and Development Act), 2016 came into ‘full force’ on 1st May 2017 but it came into force exactly 1 year back on the same day. When it was enacted in the year 2016 only 69 sections out of 92 sections were notified. There were many talks about RERA that it will bring a paradigm shift in the way the real estate industry works but it took a complete 1 year to come into ‘full force’. As per the rating agency ICRA, though the RERA came into effect on 1st May, 2016 but the delay in issuing notification may dilute the proper implementation of this Act.

Except for few states most of the states has missed the deadline (31.10.2016) for notifying the rules under the act. States like Karnataka and Haryana were ready with the draft but rules are not notified yet. Progress for setting up the RERA was slow, some states like Madhya Pradesh had set up its RERA on time but many states not even started with the process.

We needed RERA in order to revive confidence in our country’s real estate sector. It is one of the leading revenue generators in our country and it needed some regulatory authority or some transparent government authority to keep a check on developers. RERA will provide a common ground for both buyers and developers and will reduce the risks which were faced by the people before.

RERA was passed by Rajya Sabha on 10.03.2016 and Lok Sabha passed the bill on 10.03.2016 later it got the assent of the president 25.03.2016. On 26.03.2016 it was published on the Official gazette of India for the public.

RERA is of extreme importance as it will be applicable to more than 76,000 companies across the country. This act mandates number of things like registration of projects and real estate agents is mandatory now, 70% of the funds collected from buyers is to be deposited in a separate bank account in case of a new project and in case of ongoing project 70% of the unused amount is to be deposited in a separate bank account. A buyer will have all the rights to know every details about a real estate project and will also have the right to get all the documents related to the project.

RERA establishes a state authority which will govern both residential and commercial real estate transactions. RERA will ensure timely delivery of the project and it is a big relief to homebuyers. It will ensure more clarity between the developers and buyers thereby ensuring transparency.

RERA will impact the real estate or real estate brokers in many ways-

• Now even brokers are to be registered with state level real estate regulatory authority.
• Brokers in unorganized sector need to get license or they are out of the market.
• It is mandatory to make code of conduct for the agents and they have to make all their transactions official thereby curbing the unfair trade practices.
• Cost of developers will rise as now onward sale can only happen after the registration

RERA will also affect the organized real estate sector, for example a retail investor who invests in an under construction project for assured return will now have the detailed information about the financial strength of the developer offering the assured return. As a result it will put pressure on grade B developers and they need to be extremely careful before launching any project with assured return.

This Act empowers the regulators to fine and imprison the defaulters and the imprisonment can go upto a period of three years.

It is better to be late than never, although it took 1 year for RERA to come into ‘full force’ but one thing is sure that RERA will bring new hope for the people affected by the immoral practices of the builders. RERA is in its early days of development and it is the duty of the regulatory authority to make it work for the betterment of both buyers and developers.