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Newspaper Analysis ProgrameTM
WORKSHEeT -6 (UPSC PTcumMAINS-2020)
(RERA ACT)
Real Estate Regulation
Act (RERA)
NEWSPAPER ANALYSIS PROGRAMME –
WORK-SHEET
Part - 6
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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
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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
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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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