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RERA realities & homebuyers’ concerns

Posted on by Track2Realty
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Legal Hammer, Judicial Review, Real estate regulator, Regulation in property market, Builders cheating, real estate fraud in India, Track2Media Research, Track2Realty“I read it in the newspapers that after the real estate regulator RERA we buyers will not be charged hefty delay penalty by the builders. It says from now onwards there will be equal penalty for both the builder and the buyer in case of delay. Over and above that there will be defect liability on part of the developers,” says Priya Sanghvi in Pune.

However, beyond the optimism of Priya she is still not clear about many of the RERA compliances, including whether the delayed penalty is applicable to the existing under construction projects or not. And she is not alone to not have full information about the various clauses of RERA. But they are all happy that a welcome beginning has been made.

Similarly, Rakesh Apte, another homebuyer, is confused to find many ongoing projects without the Occupation Certificate (OC) and the Completion Certificate (CC) still being advertised. He believes the market is still not clear as to what precisely to expect with the new set of rules.

“I was clarified by my property agent that my under construction project need not wait for registration to advertise. They can continue all their activities as usual. However, those projects for which application for registration is not made even by July 31 to the regulatory authority cannot market their projects,” says Apte.

Vivek Tomar, a trader in Pimpri, has another query. He wants to know whether the regulator can send the homebuyers to jail if he defaults on payment. He feels such reports would deter a homebuyer like him to ever approach the regulator.

“I have read the newspaper reports that the regulator has the powers to penalize the homebuyers also in case of delay in payment. My worry is that such provisions can be grossly interpreted in favour of the developer, even if the consumer defies the regulator’s order due to financial duress,” worries Singh.

Concerned buyers 

Whether there would be equal penalty on delays in current under construction projects

Till when the under construction advertisements without OC & CC will continue

Whether the homebuyers can be sent to jail for delay in payment

Whether regulator can force the government agencies to grant approval on time

Industry is nevertheless clear that such apprehensions are just teething problems. Jaxay Shah, President, CREDAI maintains that even though most states have not been able to implement it immediately and are in the process of doing so, yet both consumers and developers need to look at it optimistically. There will be teething problems initially, but as the regulatory mechanism sets in place, we will see a smoother transition into the new administration.

For the moment, avoid any hasty conclusions and false assumptions for they will only serve as a hindrance. Engaging and diligently moving towards the common goal of building a professional, accountable, transparent and innovative sector should be the objective of all stakeholders.

“There has been a long standing call for a regulation like RERA, both from the industry as well as the consumers. The purpose of such a regulation would be to build equity amongst the stakeholders, create accountability, promote delivery driven project execution and facilitate financial and administrative transparency. The present RERA requirements fulfill all these needs. Though the compliance burden is heavy, the Act has provided the right impetus on ensuring that all due diligence which any and all consumers may require are fulfilled. This will go a long way in restoring consumer faith in the real estate sector,” says Shah.

Confident builders

Defect Liability Clause: 5 years defect liability clause is something that does not affect the organized segment of the market as defect clause is limited to defect in architecture, design & construction; but not defects due to wear & tear

Date of delivery sacrosanct: The date of delivery is the prerogative of the developer and one can always factor in external factors, including the delay in approvals before committing the timelines

Clear title of the land: It also protects the organized developers as one would know the clear title of the land before acquisition

Escrow account: It may be a problem area for cash strapped developers but one can always factor in the additional cost of borrowing from the market in the project cost itself

Selling on carpet: It doesn’t mean that the project will not have amenities and super built up area. It only means that the developer has to tell the buyer how much is the carpet area and one can accordingly charge the psf rate 

That said, the discerning homebuyers in the city are convinced that the RERA will definitely restore the confidence in the property market. As a matter of fact, many of the fence sitters are now ready to take a plunge in the housing market and that promises the market to bounce back. 

Moving forward, the moot point is whether the builders would decide to postpone their new launches keeping RERA in mind to avoid mid way issues. Within the built environment of real estate it is increasingly being questioned as to whether penalising builders for delays in the projects is justified given they rely on so many external factors.

There is a general feeling that at one point government is coming up with consumer friendly RERA and on the other hand government does not have any system or mechanism to give time bound permission to real estate sector developer. Developers question how will the government be successful in implementing the real estate regulation.

In a nutshell, RERA protects the interests of homebuyers and would drive out unscrupulous builders from the realty market. RERA is a landmark legislation that is about to change real estate into a more customer centric industry. It focuses on increasing accountability of the builders and their agents and on boosting buyer confidence. But till the time there is more clarity every stakeholder has own set of apprehensions.  

By: Ravi Sinha