The introduction of the Real Estate Regulatory Authority (RERA) Act on May 1, 2017, by the Parliament of India, came as a welcome move for Indian home-buyers, giving them the means to address pertinent issues such as project delivery delays, property pricing, quality of construction, and title and other changes. The Act was established with the goal of bringing in unprecedented efficiency and transparency in the Indian real estate sector, which contributes more than 5-6 percent of India’s GDP and is expected to touch a formidable US$180 billion by 2020. However, in order for prospective home buyers to effectively leverage the benefits of RERA, they must pay attention to a few key factors.
RERA for buyers
While RERA promises to usher in a new era of transparency for home buyers, many are still unaware of crucial factors they should look for before investing in a residential property. Most real-estate transactions in metro cities are conducted via real-estate agents. According to the RERA Act, in order to market RERA-certified projects, agents must also be registered with the regulatory body. Buyers can – and must – demand this registration number before conducting business with a real-estate agent. Similarly, before deciding to put money down on a real-estate purchase, buyers should check for the RERA registration number for the property they are interested in.
Many buyers will put up boards that list the property as ‘RERA Applied For’ to confuse potential buyers into believing that the project is RERA-certified or listed. This is a blatant misuse of RERA and an important consideration for potential home buyers.
Safeguarding your investment and interests during property transactions should be your topmost priorities. When purchasing smaller items such as cell phones or laptops, many people will spend a substantial amount of time researching their options and reading reviews by industry experts. These same individuals, however, are unaware of the need to take legal advice from an advocate before making one of the biggest financial decisions of their lives. Seeking legal advice from an advocate is a simple but effective way to ascertain that the property is free from all encumbrances.
RERA for developers
The buyer-centric focus of RERA can pose a hindrance to real-estate developers. According to RERA legislation, builders must deposit 70 percent of the amount collected from consumers for a particular project in a scheduled bank, in order to initiate the project. This amount may only be used to cover construction and land costs for that particular project. Developers are liable to be penalised in case of any delays, and may also be required to compensate buyers. While larger developers may be able to draw on their existing credit reserves to fund their projects, smaller developers will find it much harder to develop and build RERA-certified projects.
As a result, many new developments are, as yet, unsold, especially in suburban areas. Smaller developers also struggle with raising funds to undertake new projects, which creates an unfavourable playing field for them in the domestic real-estate market. Further, the Act does not have any contingencies for delays caused by slow approvals from regulatory bodies, which can take months or even years. While the Government of India has predicted that such regulation will improve the confidence of foreign investors, these investments usually work out only in favour of large developers. For the Act to be fair to all stakeholders, it must therefore also include safeguards for developers of all sizes.
Home vs investment
Article 21 of the Constitution of India states, “No person shall be deprived of his life or personal liberty except according to a procedure established by law.” This right to life takes on a much broader meaning than mere animal existence – it also includes the right to live with human dignity and the right to shelter, livelihood, and health, which are the bare necessities essential and unavoidable to lead a meaningful, complete existence. Accordingly, the Pradhan Mantri Awas Yojana – or the Housing for All 2022 scheme that was announced in June 2015 – is a strident move towards providing affordable housing for the urban poor.
At the same time, such schemes and Article 21 of the Indian Constitution are rendered futile or even unconstitutional if they are exploited for commercial gains.
For many buyers, houses are more than homes – these real-estate purchases are regarded as lucrative investment tools. A clear distinction must be made about the purpose of the real-estate investment, and duties and surcharges levied accordingly to prevent such misuse. For most home buyers, two properties will suffice their basic needs. If any buyer has already purchased two residential properties, the third purchase must be treated as a commercial property and stamp duty levied accordingly. This will ensure that the government’s measures to provide quality housing for all benefit their intended recipients more effectively.