Why RERA Act Is Not A Balanced Solution To The Problems Of The Real Estate

India’s legislature took a long awaited call in 2016 of bringing such a law to force that can safeguard the interest of real estate buyers in the country. Buyers, who were denied timely handover of promised properties for a long time, welcomed the Real Estate Regulatory Authority Act, or the RERA Act to their cause. While the act proved out to be of genuine help to those for whom it was formed, the loose ends of the legal framework it works with have put the builders at a great disadvantage.

After the act came into force, a regulatory authority was established in each state to ensure timely delivery of properties to the buyers. A total of 22 out of 28 states adopted RERA within one year of its notification, and the figure reached to 27 states in 2023. The act clearly stated the duty of the builder to deliver the complete project to the buyer at the time of possession. Besides, the authority also acts as an adjudicating body for to resolve disputes among the two parties. In case there is a delay in delivery of a project, the builder is penalised by the authority. This punishment may seem fair when seen from the front, but a three-dimensional view could change the narrative for the viewer.

Laid Back Approvals

There are about 40 to 50 approvals that the builders typically require to execute their projects. What this process lacks is a single-window approval mechanism that can grant them these permissions in a timely manner. “These permissions are mandatory in nature and even the advertisements of these projects are not allowed without certain permissions. Most developers face the daunting task of acquiring approvals from various agencies. This process is extremely cumbersome and time-consuming, especially considering that different subject matters fall under different regulatory bodies and municipalities. Consequently, many developers are not able to apply for project registration for long periods,” said Kundan Shahi, Founder, LegalPay.

For instance, it was in last winter when the Gurugram bench of Haryana Real Estate Authority imposed penalty of Rs 25 lakh on five builders for failing to deliver their projects within the set deadline. The builders who were penalised were Identity Buildtech Pvt Ltd, BPTP Ltd, Advance India Projects Ltd, KLJ Realtech Pvt Ltd, and Spaze Towers Pvt Ltd. As per the RERA Act, a builder has to move an application within the authority to seek RERA registration and file an undertaking for the project’s timeline. The authority allowed the certificates of these builders to remain in force with new deadlines to meet for their projects.

“On the basis of the facts and after considering the reason for the delay in completing the project within the time and even after the lapse of admissible extension time of one year and also giving an opportunity of hearing in this regard to promoter in the proceeding hearings, the authority, now, has decided to impose a penalty of Rs 25 lakh for violation of Section 4 of the Act,” said the statement by the Haryana authority.

However, with the intention of protecting the rights of the buyers through the RERA law, what the authorities are failing or may be avoiding addressing is the "red tapism" that has gripped the Indian economy for decades. A builder is expected to complete a certain project within a set period of time but is unable to get the approvals on time for the same. At present, approvals such as Intimation of Disapproval, Occupation Certificate or Completion Certificate consume a significant amount of time of the builders, said Shahi.

Unfair Play

Apart from the poor clearance structure, an ambiguity also revolves around the definition of an ongoing project among the RERA officials which further stretches the issue for the builders. “First, there is a lack of clarity among the officials on what is an ongoing project. And, you have clearances for the purpose of environment, mining, and pollution which take too much time. By the time the builder gets through with these, the deadline is already expired,” a legal representative of one of the penalised companies told Outlook Business.

The issue becomes even greater in case of small builders who themselves do not have the knowledge of online process that is required for the RERA registration. The challenge to go to multiple windows for the approvals pushes back their progress even further compared to large builders. While sometimes they are required to obtain the clearances simultaneously, often are the cases when they need to get the approvals sequentially. All this leads to a lot of paperwork, especially in states which have two regulatory authorities, with slow progress, and a scope for corruption. “Small builders are completely dependent on consultants for the approvals, which creates a nexus of these consultants in the market. Also, these multiple approvals lead to corruption at different levels which makes this entire process further frustrating for the builders,” said a general manager for projects at a prominent real estate company.

Considering these drawbacks, officials in the real estate sector are of view that a similar discipline should be ensured from the authorities for timely approvals, or to improvise the RERA Act. Shahi opines that putting a timeline to these approvals, would push the government authorities towards increased accountability and reduce the pressure on the builders. “The idea is to make the provisions more balanced in nature. While the home buyers need to be accorded protection, the developers risk exposure should also be reduced. This would ultimately give boost to this sector and create a win-win situation for all the stakeholders involved,” he added.

Furthermore, the duty is upon the government to look for possibilities of a single digital window in order to further ease up the process for these builders. Inspiration can be drawn from Dubai, which has already implemented a single unified electronic platform that conduct building permit transactions with all licensing agencies through one system. This not just saves a significant amount of time and effort for the builders, but also reduces the scope of corruption in the system.

For records, according to data released by JLL Research and Ministry of Housing and Urban Affairs (MOHUA), a total of 99,262 projects are registered under RERA as of 2023, and of the total lodged complaints, more than 1 lakh have been disposed by the authorities across states.