High hopes on realty act

Owning a house, an apartment or a residential plot is a lifetime dream for millions of Indians. But buying one is fraught with many risks thanks to unscrupulous elements that dot the country’s real estate landscape.

Lack of transparency in real estate transactions and widespread corruption associated with them are also proving to be major hurdles for those who want to realise their dream of having a proper roof of their own over their heads.

Inordinate delay in the execution of projects is another issue that causes jitters among home buyers while builders compound their problems by not delivering units within the promised timelines and with the promised specifications, despite pocketing payments in advance. Things are not any different when it comes to commercial properties.

To address these critical issues that plague the burgeoning residential and commercial construction sectors, the Central government brought in the Real Estate (Regulation and Development) Act, 2016, which came into full force across the country on Monday (May 1). Enacted by Lok Sabha in March 2016, the Act has 92 sections.

Of them, 59 sections were notified on May 1, 2016 and the remaining sections came into force a year later. The Central and the State governments are required to frame guidelines under the Act, which promise to make home-buyer the king.

The key element of the much-awaited legislation that, as per claims of its backers, is expected to clean up the murky real estate sector is that the Act makes it mandatory for all residential and commercial realty projects with land in excess of 500 square metres or eight apartments, to get registered with the Real Estate Regulatory Authority (RERA) to be set up by the State governments.

For new projects, the registration should be completed before their launch. Besides, the Act is applicable to the ongoing projects which were not completed by the time it came into force. But builders and realty companies are opposing the inclusion of ongoing projects as such a move, they say, will adversely impact the companies as well as the home buyers. But the failure to register with RERA will attract a penalty up to 10 per cent of the project cost or three years imprisonment to the promoter. Also, project delays will strictly be dealt with.

As widely feared, real estate has more or less become a safe haven for parking illegitimate stash. So, the Act has provisions to address the menace. It mandates that 70 per cent of the money received from customers should be deposited in a bank account through cheques and the amount should be spent only on the project through cheques.

Through its provisions, the Act is likely to improve transparency and boost demand as consumer confidence will improve, and lead to consolidation in the sector as smaller players can’t survive in the RERA era.

But unfortunately, many State governments have already started diluting the Act by framing guidelines that will weaken its provisions. So far, 13 States including Andhra Pradesh framed guidelines while Telangana is yet to come out with its norms. Fears are that RERA may turn yet another lame-duck legislation.