Have The Draft Rules Diluted Real Estate Regulator?

It was seen as a bold move when the BJP government finally managed to clear the much awaited Real Estate Regulation Act (RERA) in March this year, with stringent provisions like jail terms for errant builders. But homebuyers are worried that the draft rules that came out earlier this week seem to have diluted the act’s most potent aspects.

Have Draft Rules Diluted RERA?

“Draft Real Estate Rules also provide for payment of 10 per cent of the estimated cost of the project for compounding of imprisonment of promoter for non-registration of the project or violation of the order of the Real Estate Appellate Tribunal,” states the official release of the RERA draft rules, essentially allowing developers & real estate agents to escape jail terms by paying 10% of the project cost.

Homebuyers and consumer groups are upset about the move, claiming that the government has bowed down to builder pressure. They worry that monetary penalties by itself will not be able to deter developers from breaking the rules.

“The wordings in the rules regarding the compounding fine gives an impression that once the penalty is paid the builder gains immunity for life. This needs to be clarified,” Abhay Upadhyay, Convenor of ‘Fight for RERA’ – the homebuyer movement to fast track implementation of the act.

On the other hand, developers claim that even the 10% penalty is too high.

“The 10% fine is too high. It should be up to 10% and not 10%. This will hurt the financial viability of a developer further and even builders with the good intent of delivering a project might not be able to do so due to a fund crunch, because if a project is for 1000 crores, the fine will be 100 crores and that is huge.” says Getamber Anand, president of national builder lobby CREDAI.

RERA To Cover Ongoing Projects

But while developers and buyers lock horns over penalties, there is one clause that buyers can definitely cheer about which is the one that mandates that RERA will cover all under-construction projects which have not received Occupation Certificates (OC).

“Upon the notification of sub-section (1) of section 3, promoters of all ongoing projects which have not received completion certificates shall apply for registration of projects within three months and disclose all relevant information including the size of the apartment based on carpet area.” states the official release.

This is a big deal for thousands of home buyers who were worried that existing projects will be not come under RERA, allowing those builders to get away Scott-free. Experts say many builders will now actively look at completing work on stalled projects to ensure that they aren’t caught out by RERA. The draft rules specify promoters can’t discriminate against anyone in the allotment of apartment, plot or building on any ground.

Draft Rules Push For Full Disclosure

Apart from this, the draft rules also mandate full disclosure asking developers to the regulatory authority with information under 60 categories including key details such as the track record of the promoter, details of past or ongoing litigations relating to the developer’s projects, details of the financials of the promoter, status of projects along with approvals received.

The promoter will also have to update the project website with information regarding number and types of apartments or plots booked, garages booked, status of construction of each floor with photographs, status of approvals etc. This will have to be done within seven days from the expiry of each quarter.

Buyer Groups Unhappy With Draft Rules

While there is much to cheer about, buyer groups say the government can do much more.

“We are very disappointed with certain rules. It does not distinguish between registration procedures laid for new and existing projects. Since both new and ongoing projects without completion certificate has to be registered with the Regulator, what in all probability might happen is that builders will submit the latest approved plans and will give a new completion date. In case of a litigation related to delay payment, the regulator will go by the new date and his records will never show how many times the plans have been approved earlier and how many timelines the builder has missed.” warns Abhay Upadhyay

As things stand, the draft rules have been released for public discussion and debate. Stakeholders have been given time till July 8 to send in their comments, post which the final rules will be notified after discussions with states and the law ministry’s go ahead. Homebuyer groups are already gearing up to engage with the government to strengthen RERA.


– Errant developers can avoid jail by paying 10% of estimated project cost

– Property dealers can escape jail by paying 10% of the plot’s or apartment’s cost

– Builders and property dealers have to comply with the regulator/appellate tribunals’ orders within 30 days

– State Bank of India’s prime lending rate plus 2% to form basis for delay payment interest rate for builder-buyer

– Developer to update project website every quarter with mandated information

– Projects without completion certificate will have to register with regulatory authority

– Builder’s licence will be revoked for any default or violation of any terms of approvals

Reporter : Oineetom Ojah
Web Editor : Nikhil Narayan Sivadas


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