Synopsis: As compared to RERA 2013 act, the Real Estate (Regulation and Development) Act (RERA) 2016 was successful in empowering the home buyers. This has reduced the incidence of unfair trade practices in the real estate sector.
How RERA 2016 act was better than RERA 2013 act?
The RERA 2013 act had the following issues;
- It did not cover either “ongoing projects” or “commercial real estate”.
- Also, the minimum limit for registration of projects was so high that it excluded many projects from the coverage under law.
- These exclusions made the 2013 bill meaningless and harmful to the interests of home buyers.
However, the 2016 RERA act has fixed all the loopholes in the RERA act 2013,
- First, after a holistic review along with multiple stakeholder consultations both “ongoing projects” and “commercial projects” were included in the act.
- Second, the minimum limit for registration of projects was reduced to cover more projects. It reduced evasion under law.
How the Real Estate (Regulation and Development) Act (RERA) 2016 has contributed to the empowerment of consumers?
RERA act addressed the existing power gap in the real estate sector between buyers and promoters. It further empowered the consumers in the following ways.
- First, the real estate sector which was largely unregulated is now being regulated under RERA.
- Second, RERA along with demonetization and GST has reduced the use of black money in the real estate sector.
- Third, it has the mandatory rules of getting approval of competent authority for project plans.
- Also, according to the RERA act, the builder needs to register with a regulatory authority.
- This stringent regulation has ended the practice of selling real estate based on false advertisements.
- Fourth, to prevent fund diversion, Promoters are required to maintain funds of a specific project in separate bank accounts.
- Fifth, disclosure of unit sizes based on “carpet area” has been made mandatory. It has reduced the scope for unfair trade practices.
- Sixth, it promotes equity by making it mandatory for payment of “equal rate of interest” by the promoter or the buyer in case of default.
Federal issues in its implementation
RERA is a product of cooperative federalism. Though the Act was introduced by the Central government, state governments are empowered to notify the rules, appoint regulatory authorities and the appellate tribunals. Currently, RERA is notified in 34 states and Union territories.
However, the act is facing implementation-related issues in some states such as Maharashtra and West Bengal.
- First, in the case of Maharashtra, the state enacted its own law in 2013. The law was not consumer-friendly, and it has created a disadvantageous position for homebuyers in Maharashtra.
- However, the center repealed the state act and enforced the RERA act 2016 for the regulation of real estate sector.
- Second, in the case of West Bengal, the state government ignored RERA act 2016 and enacted its own state law (the West Bengal Housing Industry Regulation Act (WBHIRA)) in 2017.
- Even after multiple efforts by the Centre, West Bengal refused to implement RERA.
- Though there was a central law on the subject, Knowingly, the state government enacted WBHIRA in 2017.
- This act of WB government is a violation of constitutional principles and has been challenged in the court.
As SEBI is to securities market RERA will be to the real estate sector. RERA act 2016 will provide huge impetus to the growth of real estate sector while significantly contributing to the needs of Urban India.