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News & opinion

4 JUL 2017

States dilute RERA provisions, implementation challenges persist

The Real Estate (Regulation and Development), 2016 Act popularly known as RERA comes into effect from 01 May 2017, as was originally stipulated a year ago but implementation challenges persist.

It is not as if the States have been caught unawares – they knew this was coming well beforehand. However, as it stands, only 13 States, including the seven Union Territories (Andaman & Nicobar Islands, Chandigarh, Dadra & Nagar Haveli, Daman & Diu, Delhi, Lakshadweep Islands and Puducherry) have notified rules appurtenant to the law.

In addition to this, there are a few concerns related to the Act. The formal authority (Real Estate Regulatory Authority), which will implement the rules and regulations of the Act has not been constituted in most cases, so a developer who has to get his project approved – still does not know who to go to. If a developer faces a loss of revenue on account of such Authority not having been constituted in time, it will be interesting to see who would be held legally liable.

Public Authorities such as Development Authorities, Housing Boards etc. are well within the ambit of this law since the term ‘promoter’ includes such authorities as well. However, so far there is no indication that these public authorities – which also develop real estate – have come up with a new compliance framework under this law.

Uttar Pradesh has set forth certain exemptions to the applicability of the law to on-going projects, some of which are legally questionable, such as the use of a ‘partial completion certificate’ issued under the provisions of the Uttar Pradesh Apartment Ownership Act, 2013. Technically, this is what could be called a ‘dilution’ of the spirit of the law, something that other States may also be trying to do to protect the interests of developers – which may explain why only a handful of States have actually notified rules & regulations in the first place.

Again, with respect to Uttar Pradesh, while the law permits setting up of two or more Authorities within the State for better geographical coverage and speedy disposal of cases, it would appear that the State has elected to constitute only one such Authority at Lucknow.

The largest number of new real estate projects within the State of Uttar Pradesh would arguably be within the district(s) of Ghaziabad and Gautam Buddha Nagar as part of the National Capital Region, yet the developer of a project launched here would have to seek approval all the way from Lucknow (even though other approvals are generally local).

Once the law comes into effect, developers can no longer solicit investors or purchasers without approval of the Authority. This may explain why the last quarter saw a rush of new launches. It is possible that third party, below-the-radar soliciting for projects may continue such as marketing project through closed groups.

As regards looking at the enforcement of this law proactively, it is possible to have existing local building control authorities – such as municipal bodies, development authorities, town planning departments, gram, zila panchayats or block development offices, compile a list of such on-going projects in their jurisdictions for onward transmission to the proposed Real Estate Regulatory Authority.

In fact, such offices of local authorities can become collection points for the application itself and make the Real Estate Regulatory Authority’s job much simpler by collating the necessary information during the course of according approval to building plans, reducing both redundancy and time taken to process such an application. Building plan approval, incidentally is covered within the RTPSG (Right to Public Services Guarantee) Act of most States – which means that an applicant for building permission must be responded to within a period stipulated under the law (30 days to 60 days).

What can the State(s) – which have notified the necessary regulations  – do now

  1. Appoint a competent official as the real estate regulator – preferably someone who has more than arm’s length distance from any promoter. Other person(s) sitting on the regulatory authority to judge a case must also comply to standards of independence and propriety. The rules and regulations are silent about what to do if the regulator (or any member on the authority’s adjudicatory panel) has any vested interest in any proposal placed before it. In judicial parlance, such a member (a judge in the case of judiciary) would recuse himself or herself from the hearing or adjudication proceedings; but since the Authority is more of an executive as opposed to a ‘judicial person’, such a norm should be laid out, else it could result in issues with the perceived objectivity and neutrality of the regulator and put far too many cases into the tribunal’s domain.
  2. Issue executive orders for empowering the local authorities – such as those according approval to building plans – to act as a repository and conduit for new applications and to pass on the information pertaining to all existing real estate projects within their jurisdiction (which have not been issued a completion or occupancy certificate) to the regulator’s office. Pre-checks such as ascertaining the title of land, compliance to building rules, adherence to revenue code where applicable and clearances from other public agencies such as power distribution companies, water supply entities etc. can be ascertained at this stage itself, i.e. with the local authority itself – and is already part of the building plan approval process. So, for all practical purposes – these need not be repeated at the time the proposal goes to the real estate regulator.
  3. Develop a standard operating process for appraisal and disposal of cases that can be used by the regulator. This is something of a step-by-step manual of how the regulator should proceed. This could cover for on-site inspection/ first hand inspection of projects.
  4. Educate developers – both in the public sector and the private sector – on achieving compliance with the law. One way of doing this could be to set up a help desk for developers, which may comprise of a ‘clinic’ to evaluate proposals under development and to advise developers on what could go wrong, apart from walking applicants through the process – something like a “what to expect when your project is being evaluated”.