Apprehensions about proper implementation of RERA Act - Letter to Minister

  ALERT CITIZENS FORUM OF INDIA 

A7/303, Saket CHSL, Saket Marg, Thane (W) 400601.

May 5, 2017.

The Hon. Minister for Urban Development,
Ministry of Urban Development,
Govt. of India,
New Delhi.

Respected Sir,

My name is Dayanand Nene and I am based in Mumbai.
I am an active BJP karyakarta for the past 30 years. I run an NGO - Alert Citizens Forum of India, through which we conduct various awareness programs on different issues, study important legislations by the Government and give feedback regards the same.
As part of this endeavor, vide this mail, we want to give feedback regarding the new RERA Act.

Sir, The Real Estate (Regulation and Development) Act, 2016, or RERA for short, came into effect from May 1, 2017, and the Central Government, especially the Urban Development Ministry deserves a pat on the back for the same.

The common man of the country expects that RERA would end all the trouble that people have while buying a house. 

They expect that the new act will  reign in the big bad builders and stop their malpractices.

But is it really the situation? Can RERA deliver the expectations?
Sadly no.

In reality, RERA is turning out to be like an art film from the 1980s, where the system inevitably crushes the spirit of the hero, and the system- consisting of the bad guys wins. 
This is what is going to be happen with RERA. 
Allow me to explain. 

RERA is a Central Act. But land is a state subject. Any real estate project needs land. Given this, state governments are supposed to frame the operational rules for RERA. 

And this has given them an opportunity to dilute the key provisions of RERA. 
And this they have done with full impunity. 

Lets first try and understand why an Act like RERA was required in the first place. 

Let's say you want to buy a product. Let it be any product. It could be something as simple as an eraser for your child (I wonder if children still use erasers) or something a little more complicated like an air conditioner. 

What do you do when you want to buy an eraser? You head to the local stationery shop, you pay the price of the eraser and you get the eraser. 

What do you do when you want to buy an air conditioner? You head to a shop selling Air Conditioners and choose the air conditioner you want, given your budget, brand preferences, the preferences of your family and the space you have to install it. 

The retailer doesn't hand over the air conditioner to you immediately, like is the case with the eraser. ( Of course, how would you carry the air conditioner back to your house). So, the next day, the retailer delivers the AC at your house. In a few hours, a couple of people come and install it. And we are done. 

What is the point I am trying to make here? When you buy a particular product from the market that is exactly what you get. I mean there is no chance of your buying an air conditioner of one and a half tonnes and the retailer delivering a one tonne air conditioner. 

In the odd case that this happens, it is bound to be some mistake at the retailer's end and will be soon corrected. 

Along the same lines, when you buy an eraser, the stationery shop doesn't insist on selling you a pencil sharpener or a ball pen for that matter. 

At the cost of repeating, you get what you want and what you have paid for and not something else. 

But when it comes to buying a home in India things don't work in the same way. 

Imagine you paid for a three-bedroom hall kitchen in a society which is supposed to have a swimming pool, a club house, a lot of greenery and what not. 

The way things work in India, your chances of getting what has been advertised and what has been paid for, are very low. 

In fact, in many cases, the size of the apartment gets smaller. In many cases, the number of floors goes up. In the original plan the number of floors planned were ten. By the time, the building gets built, it has fifteen floors. 

And in such cases, nobody is bothered about the fact that the foundation was originally dug for ten floors and now 15 floors have been built on it. 

In some cases, the builder does not deliver on time. This leads to the homebuyer who had bought the home with the idea of living in it, having to continue paying a rent and at the same time paying the EMI on the home loan that has funded the home. 

In some cases, the builder simply takes money from the buyers and disappears. 

Considering all these points, a homebuyer in India considers himself lucky if he gets a home at the end of the promised period, at all. 

So what if it's slightly smaller. So what if it doesn't have the facilities that it was originally supposed to have. So what if the drawing room gets seepage after the first rains. 

An Indian homebuyer can adjust with all this and more. 

The RERA was supposed to help the homebuyer on such fronts. 
It essentially has four key provisions: 

a) 70 per cent of the money collected for a home project by the builder is supposed to be held in a separate bank account. Further, the money can be used only for the project and can be withdrawn according to what proportion of the project has been completed. This has been done to ensure that the builder spends a bulk of the money for the project he has raised money for and not spend it on other things, as builders are wont to do. 

b) RERA recommends a fine for the builder which can extend up to 10 per cent of the cost of the project and/or a prison of up to three years, if the provisions of the Act are not followed. 

c) The builder needs to treat any structural defects in the project arising within five years of him handing over possession to the buyer, free of charge. 

d) RERA includes ongoing projects within the Act as well, by defining an ongoing project as a project "for which the completion certificate has not been issued" on the date of commencement of the Act. This provision was put in to ensure that many projects which have been endlessly delayed over the years, come under the Act. And in the process the Act offers help to the harried buyers. 

All these provisions have been diluted by the state governments in the operational guidelines of RERA that have been notified. 

The interesting thing is that around two-thirds of the states still haven't notified the operational guidelines of RERA as yet. Under the rules, it is mandatory for the states and UTs to set up the authority. However, 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. 

The housing ministry had last year notified the rules for five UTs—Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, and Lakshadweep, while the urban development ministry came out with such rules for the National Capital Region of Delhi. The other states and UTs will have to come out with their own rules.
As per industry data, real estate projects in the range of 2,349 to 4,488 were launched every year between 2011 and 2015, amounting to a total of 17,526 projects with investments of Rs13.70 lakh crore in 27 cities, including 15 state capitals. About ten lakh buyers invest every year with the dream of owning a house.
Sir, Delayed notification and non-uniformity of the Real Estate (Regulation and Development) Act, 2016 (RERA) across various states is likely to dilute implementation of the Act.

For effective implementation of the provisions, the state governments had to frame rules governing these sections and set up state-level real estate regulatory authorities (RERA) and appellate tribunals to implement the rules. As on date, only seven states have notified the required rules, resulting in a lower compliance ratio to start with. The absence of a regulator or appropriate rules can result in a regulatory vacuum and dilution of the Act’s provisions.

This tells us how serious state governments are about implementing RERA. 

To conclude, RERA hits at the heart of the basic problem with state level politics in India. 
The state level politics thrives on the nexus between builders and politicians. 
In some states builders are politicians and politicians are builders. It is difficult to differentiate between the two. 

The trouble is that against whom the rules are being made are also the ones deciding on the rules. Hence, it is not surprising that the rules have been diluted or they lack clarity in comparison to the RERA Act of the central government. 

We request your good self to please look into these loopholes and immediately plug the same so that RERA does effectively what it is expected to do - provide a paradigm shift in the way the real estate industry operates in India and achieve the basic objective of the RERA Act - protect the interest of consumers through a regulatory regime that improves the transparency level and accountability of real estate developers.

Regards,

For Alert Citizens Forum of India,

Dayanand Nene (8879528575)
President

Team Alert: Anirudha Godse, Jitendra Satpute, Prasad Bedekar, Pramod Date, Ganesh Iyer, Sudesh Khatawkar, Sanjeev Pande, Kiran Joshi, CS Sandhya Malhotra, CA Paresh Sukhtankar, Rajan Chandok.