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1 Newspaper Analysis ProgrameTM WORKSHEeT -6 (UPSC PTcumMAINS-2020) (RERA ACT) Real Estate Regulation Act (RERA) NEWSPAPER ANALYSIS PROGRAMME – WORK-SHEET Part - 6 Copyright © Aspire IAS All rights are reserved. No part of this document may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior permission of Aspire lAS. 2 Newspaper Analysis ProgrameTM WORKSHEeT -6 (UPSC PTcumMAINS-2020) (RERA ACT) The Real Estate (Regulation and Development) seeks to empower and protect property Act, 2016 came into force on May 1, 2016. The consumers and make transactions fair and Central and state governments are liable to notify transparent. the Rules under the Act within a statutory period • The RERA Act was enacted under Entry 6 of six months. and 7 (dealing with contracts and the Land, Rights over Land, Land Improvements – transfer of property) of the Concurrent List Fall under the ‘State List’(Under 7th schedule) of of the Constitution of India the constitution. • Enacted in enacted March 2016, RERA Regulating contracts and transfer of property – came into effect from May 2017 Fall under ‘Concurrent List’ (Under th 7 schedule) of the constitution. The above act Objectives of RERA: 1. Enhance transparency deals with this. and accountability in real estate and housing Aim: transactions 2. Boost domestic and foreign Bring about transparency in the real estate sector, investment in the real estate sector 3. Provide thereby encouraging investments by foreign and uniform regulatory environment to ensure speedy domestic financial institutions and protecting the adjudication of disputes 4. Promote orderly interests of home buyers growth through efficient project execution and Key Issues (need) in the Real Estate Sector: standardization; 5. Offer single window system of 1).Lengthy approval process for project clearances clearance for real estate projects 6. Empower and 2). Lack of clear land titles protect the right of home buyers 3). Prevalence of black money 4). Diversion of funds received by the developer Key Provisions of Real Estate Regulation towards one project to more lucrative ones Act: 1. Establishment of state level regulatory 5). Construction work has come to a standstill or authorities- Real Estate Regulatory Authority the developer has left without completing the (RERA)- the Act provides for State governments project to establish more than one regulatory 6). Developer changes the layout or building plans authority Functions: after purchase • Register and maintain a database of real 7). Legal disputes (It had to be settled in the estate projects; publish it on its website for courts) public viewing, 8). Endemic issues – For Ex recessive conditions • Protection of interest of promoters, buyers in the past few years. and real estate agents 9). Distress caused by two drought years has also • development of sustainable and affordable cut demand in the rural and semi-urban segment. housing, • Render advice to the government and What is RERA? ensuring compliance with its Regulations • RERA, 2016 is a central legislation which and the Act aims to regulate the real estate sector. It 3 Newspaper Analysis ProgrameTM WORKSHEeT -6 (UPSC PTcumMAINS-2020) (RERA ACT) 2. Establishment of Real Estate Appellate • According to ICRA’s research, there has Tribunal- Decisions of RERAs can be appealed in been a marked improvement in project these tribunals. completions (ICRA’s sample set: 11 listed real estate developers who have projects 3. Mandatory Registration: All projects with plot across India) size of minimum 500 sq.mt or eight apartments • Project completions increased from 30.02 need to be registered with Regulatory Authorities. million sq-ft in FY2015 to 45.51 million sq-ft in FY2017 4. Deposits: Developers needs to keep 70% of the • Project deliveries witnessed a growth of money collected from a buyer in escrow account 30.5% from 2016 to 2017 2. Model to meet the construction cost of the project. Note: builder-buyer agreement, disclosure norms An escrow account is a temporary pass through has brought transparency in the real estate account held by a third party during the process of sector 3. The Act has been effective in a transaction between two parties. boosting confidence in the buyers. This is reflected by the increase in housing sales. 5. Liability: A developer’s liability to repair Home sales registered a 33 per cent rise in structural defects- 5 years the top nine cities in last one year 4. RERA has been highly successful in 6. Penal interest in case of default: Both promoter Maharashtra. and buyer are liable to pay equal rate of interest in • Currently, more than 25,000 projects have case of any default from either side been registered under RERA across India, out of which 62% are in Maharashtra alone 7. Cap on Advance Payments: A promoter cannot • Maharashtra Real Estate Regulatory accept more than 10% of the cost of the plot, Authority (MahaRERA) has disposed off apartment or building as an advance payment or 1168 complaints 5. Boost confidence in an application fee from a person without first global investors- increased investment in entering into an agreement for sale real estate sector. Pertaining Issues: 1. Notification of Rules: 8. Clearly defines Carpet Area as net usable floor • Only 20 out of 28 states have notified rules area of flat. Buyers will be charged for the carpet stipulated under RERA area and not super built-up area. • West Bengal, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, 9. Punishment: Imprisonment of up to three years Sikkim and Tripura are yet to notify rules for developers and up to one year in case of agents 2. Establishment of Real Estate Authority: and buyers for violation of orders of Appellate • Only Maharashtra, Madhya Pradesh and Tribunals and Regulatory Authorities. Punjab have permanent regulatory authority Critical Evaluation of RERA: Benefits 1. • 13 states have ‘designated’ regulatory Completion/ Delivery of Projects: authorities- an existing body designated as 4 Newspaper Analysis ProgrameTM WORKSHEeT -6 (UPSC PTcumMAINS-2020) (RERA ACT) authority until permanent one is compliance with the Act and payment established. schedule and liability in case of structural 4. Establishment of a Real Estate Appellate defects Tribunal: 8. Challenge in North East: RERA has been • Only 15 out of the 35 (states and UTs) challenged in north-eastern state on certain have appellate tribunal constitutional grounds- land belonging to the 5. Potential conflict between IBC and RERA: community and autonomous councils Fundamental contradiction- 9. Delays due to government approvals: • IBC allows companies to file for A major concern has been delay due to bankruptcy to provide relief to debtors or government approvals of real estate projects (like creditors like ownership certificate, land use conversion, • While, RERA seeks to provide relief to environmental and pollution NOCs etc) homebuyers and hold developers/ builders for project delays Way Forward: • RERA does not address the issue of 1. Centre and state must collectively resolve any insolvency of a developer conflict arising out of RERA implementation KEY TAKEAWAYS 2. Potential conflict between RERA and IBC to be • Recently, the Union Cabinet has cleared an checked ordinance amending the Insolvency and 3. Government agencies should be made Bankruptcy Code (IBC) accountable for the delay in granting approvals • The amendment is expected to facilitate 4. States should not dilute the RERA provisions. homebuyers when it comes to recovering Provisions for punishment of violations, should be their dues from bankrupt companies. kept intact in all state laws 5. A robust IT infrastructure should be established 6. Conflict between state and Centre over RERA for monitoring projects and quick redressal of implementation grievances • State governments regulated real estate 6. The government has already set up Central before RERA as land and land Advisory Council (CAC) for effective improvement are in the State List of implementation of RERA. The scope of functions Seventh Schedule of the Constitution. of CAC should be broadened to include advisory RERA has been enacted under Concurrent to state bodies on issues related to RERA List. This has increased the tussle between compliance various states and Centre over 7. Ensure flow of funds in the sector; endowment implementation of RERA funds should be made available to developers. 7. Dilution of Act by States: 8. States should fully implement RERA to curb • Act has been diluted by States to favour black money, given large part of it originate and developers. flows in the real estate sector • Major areas of dilution include: Definition 9. For effective implementation, the centre has of ongoing projects, penalties for non- already intervened and notified June 30, 2018 as
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