RERA Comes into Force; Homebuyers Worried as States Dilute Rules


The much awaited Real Estate (Regulation & Development) Act, 2016 comes into force today. The Act is aimed at protecting the homebuyers' interest; safeguard the homebuyer from any wrong doings by builders. With all 92 Sections of the Act coming into effect, developers will have to get all ongoing projects that have not received Completion Certificate registered with Regulatory Authorities in the next three months, which is by July end. 

Minister of Housing and Urban Development, M Venkaiah Naidu said, “Real Estate Act coming into force after a nine year wait marks the beginning of a new era making buyer the King. The Act ushers in the much desired accountability, transparency and efficiency in the sector with the Act defining the rights and obligations of both the buyers and developers"

But so far only 13 states and UTs have so far notified the rules. The states that have notified the rules are Uttar Pradesh, Gujarat, Odisha, Andhra Pradesh, Maharashtra, Madhya Pradesh and Bihar. Another 16 have drafted the rules. Haryana has released the draft rules and has given 15 days’ time for people to send in their comments suggestions.

The Act comes into force amid a lot of apprehension among buyers as several states including real estate hot beds, Uttar Pradesh and Haryana is understood to have diluted several key provisions of the Act. 

“Implementing the Act will bring in drastic changes for the better in real estate industry by eradicating malpractices prevalent and bringing complete transparency. However, the dark patch in the whole process is in the way the states are diluting their Real Estate Rules in favour of developers by going over board to please their developer friends. This has the potential to render RERA completely redundant if corrective steps are not taken forthwith. We have full faith in our Prime Minister who has been a crusader against corruption that he will sense the nexus continuing between states and builders and get things corrected  at least in cases of states like Maharashtra, Gujarat, Madhya Pradesh, Uttar Pradesh and now Haryana which are all ruled by BJP," Abhay Upadhyay, Convenor, Fight for RERA, the umbrella organisation of homebuyers said. 

The draft Haryana RERA rules seeks to exclude projects which have applied for occupancy certificate or part completion certificate. Such projects will be out of the purview of the Act if they get the occupancy certificate from the competent authority within three months of applying for it. It also excludes projects which have received completion or part completion certificate in case of plotted colony and occupancy certificate for the building blocks of integrated complexes like group housing, commercial, cyber park or cyber city.

"Why can’t other states adopt the Rules laid out by the Centre like Odisha has done? Why change or dilute? Let Rules be the same everywhere if you really care for the homebuyers," Neeraj Jagga, a homebuyer said.

The UP government has diluted the rules by inserting a clause that seeks to exclude projects that have applied for (but not received) completion certificates, projects where conveyance deed has been executed with 60 % buyers and incomplete projects where maintenance has been handed over to association of allottees. 

“While there are states that are yet to notify their rules, based on our interaction with the government its work in progress and we are optimistic that final rules in these states will be notified soon along with the appointment of the regulator,” said Jaxay Shah, President of realty developers’ apex body The Confederation of Real Estate Developers’ Association of India (CREDAI).

"Undoubtedly, states who will bring in progressive rules and implement RERA better will see a much more vibrant real estate market," Rohit Raj Modi, Director, Ashiana Homes said. 

Under the Act, developers will have to display sanctioned plans and layout plans of at least 3 feet X 2 feet size at all marketing offices, other offices where properties are sold, all branch offices and head office of the promoters in addition to the site of project. 

Real Estate Regulatory Authorities may take decisions on all issues preferably through consensus failing which through voting with Chairman using Casting Vote in case of a tie. There shall be quorum for the meetings of the Regulatory Authorities and if a meeting is adjourned due to lack of such quorum, such meeting can take place without quorum. Members of Regulatory Authorities shall declare interest if any in the matters coming up for discussion and shall not participate there in. 

Some of the major provisions of the Act are:

  • Developers cannot advertise or launch a project without registering with the regulatory authority
  • Developers have to deposit 70% of the funds collected from buyers in a separate bank account in case of new projects and 70% of unused funds in case of ongoing projects
  • Projects with plot size of minimum 500 sqmt or 8 apartments shall be registered with Regulatory Authorities
  • Both developers and buyers to pay the same penal interest of SBI’s Marginal Cost of Lending Rate plus 
  • Liability of developers for structural defects for five years
  • Imprisonment of up to three years for developers and up to one year in case of agents and buyers for violation of orders of Appellate Tribunals and Regulatory Authorities

The Real Estate Bill was first introduced in Rajya Sabha in 2013.

At the time of passing of the Bill in Rajya Sabha in March, 2016, there were 76,044 companies operating in the real estate sector. Of these 17,431 were in Delhi, 17,010 in West Bengal, 11,160 in Maharashtra, 7,136 in Uttar Pradesh, 3,054 in Rajasthan, 3,004 in Tamil Nadu, 2,261 in Karnataka, 2,211 in Telangana, 2,121 in Haryana, 1,956 in Madhya Pradesh, 1,270 in Kerala, 1,202 in Punjab and 1,006 in Odisha. 

As per industry information, between 2011 and 2015, real estate projects in the range of 2,349 to 4,488 projects were launched every year amounting to a total of 17,526 projects with a total investment of Rs 13.70 lakh crore in 27 cities. About 10 lakh buyers invest every year with the dream of owning a house.

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