2017: The Year of RERA – What is the current scenario?

    CBRE real
    Report: CBRE

    The Real Estate Regulatory Act (RERA) which came into effect from 1st May 2017, was aimed at ensuring accountability, infusing transparency and bringing uniformity in practices in the real estate sector. The Central Act, which was notified during 2016, covered both on-going and new projects under its purview. However, while notifying the rules, selected states have diluted this regulation by exempting majority of the under-construction projects, along with other dilutions. As the year comes to a close, we review the implementation status of this Landmark Act. The table below highlights the status of RERA implementation across states as of December 2017:

    One of the most critical aspects of the Act has been the setting up of online portals at the state level, detailing project level information for public access. These registered projects are required to be updated on a quarterly basis, highlighting the project progress and sales information. However, out of all the states which have implemented RERA in various formats, only 11 have an active online portal. The table below highlights the states which have implemented an online RERA portal and the availability of information on their respective portals:

    Status Number of States Name of States
    Implemented 18 Andhra Pradesh, Bihar, Chhattisgarh, Gujarat, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, Uttarakhand, Haryana, Jharkhand, Himachal Pradesh, Assam
    Work in Progress 10 Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Telangana, Tripura, West Bengal, Goa

    The Bombay High Court Upholds RERA Validity

    Across states, a number of petitions challenging the validity of RERA were filed across various High courts. At the behest of the Central Government, in September 2017, the Supreme Court transferred all pending cases to the Bombay High Court to avoid multiplicity on the issue. In December 2017, a ruling by the Bombay High Court upheld the following provisions of RERA:
    • RERA provisions to apply to all ongoing projects
    • The court dismissed the excessive interest rate argument (in case of completion delays) and ruled that it is fair and imperative to protect home buyers
    However, the High Court has granted relief to developers on the following points:
    • In exceptional circumstances, if the developer fails to deliver, the RERA authority has powers to provide an extension to the project without a penalty
    • The RERA appellate tribunal should be headed by a judicial officer; majority of the tribunal members must also be officers or members of the judiciary
    State No. of Projects Registered Detailed Information of Projects Options for Online Complaint Registration
    Andhra Pradesh Not Available Project level information not available Yes
    Gujarat 950+ Only basic information such as registration number and type of development Yes
    Karnataka 850+ Project level information not available Yes
    Kerala Registration on hold Project level information not available No
    Madhya Pradesh 1,200+ Only basic project details such as project start/ end data, location, promoter details with previous project details Yes
    Maharashtra 14,000+ Detailed project information such as promoter information, past experience, project detail, project construction update, litigation details of the promoter, etc. Yes
    Rajasthan 450+ Detailed project information such as promoter information, project cost details, past experience of the promoter, project details with approval documents. Yes
    Tamil Nadu 250+ Detailed project information such as promoter details, past experience, approval detail and project details No
    Uttar Pradesh 2,950+ Only basic project details such as project registration certificate and period of validity Yes
    Uttarakhand 70 Only basic project details such as project start/ end data, location and promoter details No
    Himachal Pradesh 7 Detailed project information such as promoter details, project details, sanctioned project plan and project professional details  Yes

    Way Forward

    The combined effect of demonetization and RERA, has led to some disruptions for residential real estate. The supply and demand in the second half of 2016 witnessed a decline of about 28% and 30%, respectively, on half-yearly basis. As the impact of demonetization wore off, the first half of 2017 witnessed a recovery in both demand and sales. However, this was short-lived, as the implementation of RERA has not been a smooth ride. With developers focusing more on completing RERA related formalities, rather than launching new projects, Q3 2017 witnessed a 28% drop in supply on q-o-q basis.

    However, in the long run, the Act will be a positive step towards resolving issues related to accountability, transparency and investor confidence in the sector. It is also expected to revive end-user sentiment, resulting in a more resilient and end-user driven demand in the residential segment, going forward. However, this can only be achieved if the spirit of the Act is upheld. The ruling by the Bombay High Court is critical here, as it tries to ensure that states do not try and dilute the purpose of the Act by making exclusions. Also, the setting up of a Central Advisory Council for effective RERA implementation is an indicator that the government is keen on implementing the Act in a time-bound manner. Developers in most states have already understood that RERA is a definite reality. It is now only a matter of time that all 28 states implement the Act and provide the sector with the much-needed uniformity and transparency.

    NBM&CW February 2018

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