Is RERA a rating agency? Does real estate regulation & promotion all about promotion, especially when RERA has not been a success story to regulate arguably India’s most dirty business. The question arises because in a couple of States the RERA had earlier announced to rate & grade the developers with much fanfare. It is a different matter that Track2Realty had questioned it since beginning as to whether RERA has stood up to the cause for which it was enacted. Whether SEBI or IRDA rates the companies which it monitors as the regulators?
In an ecosystem where RERA has always been in question, since the inception, due to its inaction, non-execution of its orders, and questionable legal acumen of RERA members, the announcement of RERA rating has always been a matter of its going more for garnering the headline. RERA has often been labelled as the toothless tiger, and in the wake some of the RERA members across India openly asking for more powers, it seems RERA always wanted to outreach its quasi-judicial powers.
Sadly, the RERA Act that talks about regulating and promoting the real estate has more often than not been exercised to promote than regulate. In principle, Section 32F of RERA Act recommends provisions to encourage grading, but then RERA doesn’t have expertise to do the same.
And hence, it is no surprise that RERA rating eventually remained only on paper. RERA had earlier said that the idea was to make home buyers take informed decisions, but RERA’s own competence with grading is questionable.
First, it was UP RERA that announced to rate the developers and the housing projects. They even announced to hire an external agency to do the same. And it is almost four years since then. Nobody has heard anything about it. An external rating agency, which otherwise also does financial rating of the developers, is anyway not a mechanism which would be perceived as objective.
Now the Maharashtra RERA has publicly announced to put grading of developers on hold. The Bombay High Court, during an inquiry last year in a case related to a stalled Mumbai real estate market, had asked the State Govt whether MahaRERA could rate or classify developers to ensure that buyers make informed decisions.
The fact of the matter is that rating is a very specialized area – whether it be financial rating by the specialist agencies, or the brand rating by Track2Realty. But RERA members in their own fancy thought that are specialists for comprehensive rating, including technical, financial, legal and project overview. It was said that grading will help the buyers and bridge trust deficit as they can take informed decision.
But real estate is a complex business, and operates on ‘sell & build’ model. It’s not like ‘build & sell’ where you first create a product and then sell it in the market. Empirical evidences hardly lead to a balance overview. Even with the best of intentions for the clients, the lawyers who are hired to do due diligence often fail. How could one anticipate the future challenges to the developer and his projects during the 4-5 years of construction lifecycle? And to rate a delivered project doesn’t add value to the buyers. Rating or grading of developers and the projects would only make sense when the regulator first creates an honest ecosystem through regulations.
Track2Realty View
The top priority of RERA should be to ensure the malpractices are eliminated. RERA should also ensure that its orders are executed, in letter and spirit. Multiple complaints from buyers go unheard, and in cases where there are favourable orders, buyers have to run from pillar to post to get them executed. Just to throw some statistics that these many cases have been resolved doesn’t lend credibility to RERA.
There is no entry barrier in the business at any given level. Can you open a bank today, without fulfilling the RBI’s criterion of net-worth & other legal requirements. But you can become a builder overnight. Is real estate like a mom & pop store in the neighborhood? Everybody is a broker in the business, even the drivers of the developers, and RERA thus far couldn’t ensure that only RERA registered brokers are there in the business.
Till the time the homebuyers get the justice, either with delay penalty or refund without the feeling that RERA proved to be just another window of lengthy litigation, such moral overreach would not add value to RERA as it will complete 8 years in 2025.
Ravi Sinha
Twitter: 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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