The Indian real estate sector has come a long way over the past few decades. From a largely unorganized and unregulated sector, it has become one of the largest and most resilient real estate industries in the world. Today, it is one of the largest contributors to the country’s GDP. It also employs one of the largest numbers of unskilled and semi-skilled workers. However, the country’s real estate sector has seen a fair share of ups and downs during this period. There have been periods when the industry has boomed while there have been other periods when it has been hit by the downturn. Delays in project delivery, inflated costs, poor construction quality, changes to project plans without notifying beneficiaries, project cancellations and disgruntled investors were becoming common practice. There was a serious lack of trust among customers towards the sector as a whole.
There was a longstanding demand from end users for a regulator. The demand was met by the government in 2016 with the enactment of the Real Estate Regulation Law (RERA). The main objective of RERA was to curb irregularities in the sector and to safeguard the rights of buyers. The provisions that specifically targeted builders and developers were now balanced.
RERA obliges developers to register their projects with the RERA authority in case they exceed 500 square meters in area or have more than 8 apartments planned. The RERA registration number must be mentioned in all announcements and communications related to the project. All information relating to the project, developer, land status, approvals and project completion schedule should be mentioned and regularly updated on the authority’s website. RERA is also ordering the builders to keep 70% of the project receivables in an escrow account. This amount can only be used for the purposes of the project.
Also read: How is the Indian real estate sector currently positioned to begin its next growth path?
Before RERA, there were so many versions and interpretations of zones, such as mat zone, built-up zone, super-built zone, and sellable zone. With RERA clearly defining the term mat area, and there is no ambiguity now. The law also provides for penalties for developers and interest to be paid to buyers in the event of a delay in the project. There are various other measures and provisions to ensure the rationalization of projects.
Before RERA, the real estate sector suffered from opacity. Customers had to trust the words of promoters and their brochures and advertisements. If plans or project details change, most builders don’t bother to notify existing clients. However, after RERA is enacted, developers must provide full information regarding the project on the authority’s website. If project plans change, developers should immediately update the information on the website. Customers can now stay informed about the project and know the exact status of the project from the RERA website anywhere and anytime.
Completion of the project on time
In the pre-RERA period, project delays were commonplace. There were no penalties for the developers, so they had nothing to worry about. In many cases, funds from one project were diverted to another, which often led to a financial crisis in the project, which resulted in a delay in project delivery. Providing an escrow account for the project now prevents this from happening. The RERA provides for financial penalties for promoters in the event of delay. Therefore, the developers carefully monitor the project deadlines.
As mentioned earlier, there was a lot of malfeasance in the real estate sector before the enactment of the RERA. False promises, altered project plans, poor construction quality, overcharging and late deliveries were common. Now, RERA offers expedited dispute resolution for all issues faced by homebuyers.
Also Read: Home Buying Checklist – Key Points First Time Home Buyers Should Consider Before Investing
Increased buyer confidence
As projects were delayed and stories of developer malfeasance began to emerge, homebuyers had begun to lose faith in the sector. Due to the misdeeds of a small part of the developers, the whole industry suffered. This results in lower sales in the sector. RERA has helped the real estate sector regain the confidence of buyers. Buyers can now be assured that the information provided by the manufacturer is truthful and transparent. They don’t have to worry about funds being diverted from one project to another. Now buyers feel reassured that there is an authority to protect their rights and interests. The renewed confidence of buyers and the increase in sales prove it.
RERA has a comprehensive framework to protect the rights of real estate customers. Customers can now relax and invest in the industry with a fearless spirit. For a few builders, RERA initially seemed like a hindrance, as they had to invest time and resources to upload a lot of information to the authority’s website and it gave them a little leeway to play with the information. . The increased trust from customers and sales has proven to be a real enabler.
By Ameet Hede, VP-REPL (Rudrabhishek Enterprises Ltd)