It was conceptualised to clean the opaque ecosystem of Indian real estate; was touted to be the biggest reform of the sector; and expected to enhance the home buyers’ confidence index. But seven long years after the enactment of the Real Estate Regulatory Authority (RERA), it has still not evolved as a stamp of trust for the harassed home buyers. RERA’s tryst with trial & error has not only dented the confidence of the home buyers but also lent credence to the perception that complaint with RERA rather gives an edge to the builders. After all, RERA has been relegated to be the balancing act for both the builder and the buyer. A Track2Realty analysis.
It is ironical that unlike many developed countries, the ground realities have not changed for the Indian home buyers under RERA regime. A vast majority of Indians look at it as another window of litigation. Worse even, it is more often than not referred to as a toothless tiger. A perception has hence gained ground in the last seven years that consumer courts are far better option for the redressal of home buyers’ grievances.
As the built environment of Indian real estate gets ready to celebrate what they repeatedly refer as a path-breaking reform, an average home buyer is left wondering whether all the celebration is of any significance to him. The reports of respective RERA State bodies claiming to have solved lakhs of disputes between builders and buyers only frustrates those who are still at the receiving end in the Indian housing market.
On the 7th anniversary of RERA, let’s look at 7 grey zones and/or pain points where RERA has failed to win trust of the buyers:
Question #1: Has RERA enhanced transparency?
RERA was conceptualised to goad the Indian real estate to a transparent eco system. However, the business continues to be an opaque market place for both the investors as well as the home buyers. Apart from the mandatory builders’ upload of project status & construction status on RERA portal, nothing has changed on the ground.
For an average home buyer, RERA doesn’t come across as a point of due diligence. Issues like builders’ past track record, construction quality and timely delivery are still cross-checked through personal references of friends & family. A defaulter builder continues to get RERA registration for his next project, and the regulator is no deterrent against unfair practices. RERA could not even ensure that the online reputation of the builders’ are not rigged in their favour through own cartel of brokers and digital media expenditure.
There has been no transparency on projects having better compliance with timelines, delivery, quality assurance, structural safety, facilities and lack of false promises on part of the builders.
Question #2: Has RERA ensured timely possession?
Delayed delivery was one of the fundamental malaise of housing market that had led to the demand for a regulator. Alas! Soon after its inception RERA came across so very lenient to the builders that it allowed the hitherto 7-10 years delayed projects to apply with a fresh timeline of another 5 years. So, someone who had bought the apartment at the time of his/her marriage finally hoped to get it by the time their children got married.
Section 7 (3) of RERA, though it talks about terms & conditions under which projection completion deadline is extended, is exploited by the developers, often citing as bizarre alibis as financial crunch and market conditions. It simple means that RERA has allowed the developer to launch a project without its financial closure in consideration.
Furthermore, builders are nowadays launching projects with as long & arbitrary deadline with RERA as 6-8 years, without being questioned about the industry-accepted timelines of delivery.
Question 3: Has RERA changed broad market practices?
RERA was supposed to put an end to the arbitrary ways & means of the developers, and set standardization and professionalism. But the developers continue to practice in the pre-RERA ways. Instances of pre-launch and, even worse, IPO style launches have dented the confidence of the home buyers. In the absence of Model Builder Buyer Agreement, despite repeated suggestions by the Supreme Court, builders continue to throw Unfair Contract in the face of the buyers.
In many cases, the Builder Buyer Agreement is handed over to the buyer only after having made an initial booking payment. The catch here is that the contract reads that the builder could forfeit 10-20% amount in case of booking cancellation, even if it happens in the wake of buyer not finding the contract to be fair or clauses are justified. What adds insult to the injury is the fact that builder forfeits not just 10-20% of the booking amount, but of the entire sales consideration.
The law mandates that any change in FAR/Lay Out needs written consent of two-third of the buyers. In reality, RERA is helpless because builders force the buyers to sign prior consent for future changes. You dare to deny this illegal diktat, and the builder would resort to even more coercive action of cancellation or denying possession and dragging you into long legal battle. By that time, two-third of the buyers succumb to builders’ threats.
Question 4: Has RERA ushered in fair sales?
Sales channel is the worst case in point, and most of the brokers on ground are not even RERA registered. RERA registration of brokerage firm translates into deploying as long a chain of sub-brokers (even drivers & house helpers) to hit the ground as sales reps.
RERA mandates the developers to sell on Carpet Area but prevalent market practice is to sell on Super Built-up Area. It often leads to builder-buyer conflicts as builder ends up selling more open spaces than what he is entitled to as per the approved sanction plan over the given land parcel. Instances of green area being sold as open parking has also been reported.
Then there are instances of builders’ arbitrary financial demands, ranging from Escalation Clause mid-way citing higher construction cost to asking for payment before the schedule timelines as per construction-linked payment plans.
RERA has thus far not set up any precedence of fair practices by taking suo moto cognizance over any of these malpractices. Nor has it been proactive in ensuring there is proper verification of the claims of the builders.
Question#5: Has RERA reduced litigation burden of buyers?
RERA orders are no more than just paper decree for a vast majority of the home buyers. RERA only self glorifies by narrating statistics of complaints resolved, but it doesn’t talk about justice delivered.
In the infamous case of Supertech Emerald Court twin tower demolition, the Supreme Court had categorically point out the perils of lengthy & costly litigation for the home buyers. RERA was initially conceptualised as the single window litigation for the harassed home buyers. Today, builders don’t care. For an average home buyer, approaching RERA means even prolonged litigation, with RERA judgments being challenged before REAT, then High Court and finally the Supreme Court. The entire process could take no less than a decade.
What adds insult to the injury of the home buyers is the fact that RERA orders against the builders are not executed. Even the High Courts have time and again pulled up the District Magistrates for not acting upon the RERA orders of delay penalties and recovery. The fact is that even the respective District Magistrates are having no infrastructure for execution of RERA orders.
An RTI by Advocate Devesh Ratan asking whether the ex-bureaucrats as Adjudicating Officers of RERA have any legal training, reveals it all. The fact is that RERA members, unlike Retired Judges at various forums, have no legal background or training.
Question #6: Has RERA been stern with builders?
The Supreme Court has categorically stated that as per the Section 18 of RERA the home buyers have unqualified and unfettered right to get compensation & refund, even if there is delay of one day. But in practice there are several RERA judgments which are discriminatory and aligned to give builders a free run. The buyers are categorically denied their legal rights of refund in the name of interest of majority of buyers.
Even in the wake of arbitrary Builder Buyer Agreement saying builder will demand 18% on delayed payment but will give only INR 5 Per Square Feet (not even 1%) if delay is on his part, the builder is more often than not asked to pay only MCLR (Marginal Cost of Lending Rates) plus 1% against delayed delivery.
RERA continues to grant new registration to the builders who have repeatedly defaulted and have several recovery certificates pending. The regulator just doesn’t cross-check the credentials of the developer, as to how many times one has defaulted in the past.
Question 7: Has RERA helped well intentioned builders?
Forget the plight of the harassed home buyers, RERA has not been of any help to the well-intentioned builders. Since the government agencies are not accountable to RERA, it is helpless when the builder is trapped with delayed approvals and inter-departmental conflicts. A couple of State RERA got into headline for its intent to reward the builders for better compliance, quality and timely delivery. It only remains on paper thus far. RERA Act anyway doesn’t expect the regulator to be a grading agency.
In the last seven years the failures of RERA far outweigh its benefits to the home buyers. The Indian real estate continues to lack on account of transparency, fair practices, project execution, timely delivery, grievance redressal and accountability of developers. It is hence no surprise that the cases of builders getting into NCLT has not reduced after RERA came into force. There is an urgent need to overhaul the RERA by giving it more legal teeth, uniform framework across the States and having qualified legal Adjudicating Officers, like Retired Judges to ensure RERA has better acceptance in the collective consciousness.
Ravi Sinha
#RaviTrack2Media
Ravi Sinha is a journalist with over two decades of cross-discipline media exposure. He is the CEO of real estate thinktank group Track2Realty. He has been writing extensively on the real estate sector for more than a decade now. Evaluation of real estate brand performance is his core domain expertise and he has immense insight into consumers’ psychograph. He has conceptualised Track2Realty BrandXReport as India’s 1st & only objective & non-paid brand rating journal that is industry-accepted benchmark of brand equity & ranking of the Indian real estate companies.
Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.
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