States need to set rules of business in the interest of the consumer
The road has been paved for setting up of the Real Estate Regulatory Authority (RERA) after the Parliament approved the Real Estate (Regulation and Development) Bill. The nod from the Parliament has set in motion a time bound process and each of the states now have a fixed time to frame the rules for the Act and set up RERA, the regulator for the real estate sector.
RERA has been set up to regulate the stupendous growth that real estate has seen across the country over the last 10-15 years. The action now shifts to the states which will have to stick to the timelines as suggested by the new Act. State governments will have to frame the rules for the Act and constitute the Real Estate Regulatory Authority, with which real estate companies will have to register their project. There is an elaborate retinue of rules under the new Act that have to be followed by the real estate companies, failing which fines could be levied upon them.
A regulator’s job is to ensure the interests of the industry is kept in mind along with that of the consumers so that there is equilibrium between the two.
While the intention of setting up the regulatory body is noble, it has added to the uncertainty for the real estate sector. In the form that it has been legislated, the Act has ended up being an extension of the Consumer Protection Act, with a little more bite, perhaps.
The regulator getting some teeth is welcome because if the provisions were to be fairly implemented, the companies which fail in the standards for commitment to the consumer could fall by the wayside. It may not take very long for that to happen because in the case of delay in possession, if the case is brought to the notice of the adjudicator, it will have to be disposed off in 60 days. It may be pertinent to remind here that consumer courts are also supposed to dispose off cases in a time bound manner.
While the resolution of complaints now has a deadline looming large, the companies have not been lucky. Getting government approvals can be a nightmare and, in some cases, can take 2-3 years before all the retinue of paperwork is completely.
The Act has not made it mandatory for the government agencies to ensure timely clearances, leaving the companies in a precarious situation battling government agencies and ensuring the deadlines are met for consumers. So, for nearly 20 regulatory clearances that any project has to get, it is mandatory for the clearance process to be completed within a stipulated period.
If there is a delay on the part of the company, they stand to be fined for it, if a customer decides to knock at the doors of RERA.
The ongoing projects are also to be brought under RERA’s purview, something that could add to the uncertainty and confusion. States will have to tread cautiously on this because a stringent approach toward this could lead to litigation and, ultimately, lead to further delay in handing over the completed projects to the buyers.
When the states sit down to finalise the rules of business, it could be good to formalise a few things in the interest of people. When real estate companies deposit the monies owed to the government as external development charges that are often not spent for the purpose that it had been paid. Instead, sometimes city corporations or governments spend it for needs that may be more urgent, depriving the local community of their rightful funds for their local needs. Clearly stated rules of business will improve transparency in spending of the funds will only make buyers happier.
State governments could perhaps raise the bar by creating an escrow account where these funds could be deposited. These funds could be withdrawn only for the specific purpose for which they were collected. 70 per cent of the funds could be deposited into the escrow account. If the rules of business make this mandatory, states will be able to ensure consumer interest is served.
These measures could improve the transparency on behalf of city municipal corporations or local governments. Buyers will surely benefit from such a move. If the government agencies can help complete their part of the work in time, it will help companies be more transparent with their work too, helping the industry and consumers, in turn.
Perhaps, in a tight and consistent regulatory environment, it will be difficult for the non-serious companies to survive and the industry might see some of them being pushed out as part of the natural process.
Real estate in India has not been given the status of an industry in India. Therefore, often its views are not taken into account during formal processes where its welfare and growth are being discussed and regulated.
If the government were to be on an overdrive to improve the ease of doing business, land use for a specified purpose must be pre-notified so that there is no delay at all in securing all the approvals before construction work can begin. The industry has always been keen to work in the interest of the consumers. We need the government to take the extra step to walk ahead, together.
