Issues with RERA

Why in news?

Recently a new piece of legislation governing the real estate sector came into force.

What is Real Estate Regulation and Development Act (RERA)?

• It was proposed in 2009 and got implemented in the year 2016.
• The aim of the Act is to safeguard the interest of home buyers in the primary real estate market.
• The Act stipulates compulsory registration of all the residential projects with plot size more than 500 sq. meters.
• The developer will need to disclose draft of builder buyer agreements, to the authority.
• A clear picture of the number of units sold and construction status also has to be disclosed.
• Incorrect or incomplete disclosure will attract a penalty of 5% of project cost.
• Buyer will be able to get information on defaulting developers.
• It has been decided that a developer can sell only on the basis of usable area.
• This helps a home buyer understand how much he is paying for each sq. ft that he will get for his use.

How this law will be implemented?

• RERA is a central law, its implementation requires the co-operation of state governments.
• The law requires each state and Union Territory to set up its own real estate regulatory authority.
• It will be this authority that should frame the rules under which the Act will operate in that state or Union Territory.
• All the projects and agents operating in the state are supposed to register with this state-level regulatory authority within three months of the notification of the Act.
• This provides important transparency to buyers.
• A web site need to be maintained by the state level regulator, so that buyer can check the details of the project’s regulatory filings.

What are the issues with the implementation?

• Many state governments are lagging in the full and proper implantation of the Act.
• Out of 36 only 24 states and Union Territories had not set up regulatory authorities and 16 had failed to notify their rules. 
• The real estate sector has been highly affected by demonetisation and GST tax regimes.
• Many projects and agents have to wait leading to a slow pace of registration.
• For instance, only three projects were reported as having been registered in Rajasthan.
• In Mumbai, although there may be as many as 800 real estate projects under way in the city proper, not one had sought registration.
• Some major disruption of business seems inevitable for the sector.

Source: Business Standard