The Real Estate Regulatory Authority bill (RERA) was passed by parliament in March 2016 and notified by the central government on May 1st that year with states mandated to notify their respective rules by 31’st October. However, only four states and six union territories have complied so far. In a recent letter to all chief ministers, Union Minister for housing Venkiah Naidu has reminded that states must notify their rules by 30th April to meet the deadline of 1st May 2017.
The implementation of RERA has been eagerly awaited by most real estate investors and prospective buyers.
Let’s go back to that morning a little less than a year ago when news of the RERA being passed made the headlines. How did it impact a few ordinary people?
Manjula Chaturvedi, 64 has had a smile on her face since morning. Vishal Bhagat, 39 is particularly cheerful today. Sanchit and Payal Sinha, both 28, have scheduled a busy weekend for themselves. Suresh Anand, 53 is on his way to the office, earlier than usual.
This is an unusual day for these five people. There’s news been trickling in since last evening. A long pending piece of legislation has finally been passed by parliament. The Real Estate Regulatory Authority Bill, RERA is on its way to becoming law.
Manjula, a retired teacher has accumulated about 43 lakhs from savings and her late husband’s retirement payout. Two years ago, she had decided to invest in a high-rise apartment project in Greater Noida, but then most friends and relatives advised her to stay away from the real estate sector. They caustically remarked her funds were safer with her banker than with a builder. Safer maybe, but they were diminishing in value. While she was aware of the kind of returns real estate can yield in the long run, she was particular that her money is invested securely and safeguarded somehow. And then, this morning’s newspaper headlines brought a smile to her face.
Suresh Anand had been preparing for this day for almost a year. He was aware of every clause in the RERA bill. He had kept a track of every proposed amendment, and knew of the pressure exerted by the builders’ lobby while the bill was being drafted. After all, he was part of that lobby.
Vishal Bhagat had also been tracking the RERA bill journey with great interest. He knew the passing of this bill just might be the catalyst that would turn around the depressed real estate market. For a serial investor like him, an upswing in market rates during 2016-17 would help him exit from a few under-construction projects giving him fresh funds to invest in newly launched projects. Newly launched and covered by the RERA bill provisions.
Sanchit and Payal Sinha are both corporate executives, living in a rented apartment in Gurgaon. Their housing loan was swiftly approved a year ago, and they’d been getting calls from broker and developer offices offering attractive projects to invest in. But Payal was clear that she didn’t want to invest in a flat with an uncertain delivery schedule. She also didn’t want to sign on a one-sided builder buyer agreement. A few months ago, she had told Sanchit that the passing of the RERA bill was just a matter of time. And yesterday, that time arrived.
Manjula Chaturvedi is aware that out of every cheque she hands over to a builder, 70% of its amount goes into an escrow account from which funds can only be used for that particular project. Payal and Sanchit realize that this will ensure that there flat, when booked, will get delivered in time. Suresh Anand wasn’t too happy about this, he’d have preferred a 50% limit, but then non-diversion of funds would mean happier customers who’d again invest in any new project of his.
Sanchit is reassured to know that every builder must file details of all approvals with the state regulatory authority, clearly, mention the carpet area, take responsibility for fixing structural defects for up to five years, and set up an allottees association within three months of handing over possession.
There’s one provision in the bill that has Vishal Bhagat very relieved. Whenever his installment payment got delayed he’s had to pay penal interest @ 18 to 24 percent to the builder. However, on those projects whose handing over is delayed, and he knows all his are running behind schedule, the builder has got away with a measly penalty of a few rupees per square foot per month of delay. But now he’ll be on a level playing field with the builder. The rate of interest payable in case of default or delay will be the same for Vishal as well as the builder. Vishal now expects speedier construction in new projects. He also hopes the ambiguity about the bill’s provisions being applicable to existing projects gets sorted out soon.
But Suresh Anand is against RERA being applied to under-construction projects. He feels he already has a lot of work cut out to meet the RERA bill’s provisions. But somehow, he’s upbeat. He foresees a revival in the market.
That could, and will definitely happen. Payal and Sanchit have scheduled a visit this weekend to one of Suresh Anand’s new housing project site which is being marketed as RERA complaint. Maybe, Manjula might be a visitor there soon. Vishal Bhagat was once a regular investor in Suresh Anand’s projects. His serial investor instincts have been reawakened.
Almost a year later, they’re still awaiting the roll out of RERA in their state. Here’s hoping it happens by the 1st of May.