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Even as the Real Estate Regulatory Act (RERA) comes into effect, delay in issuing notification and non-uniformity of rules across the states may dilute its effective implementation, says the rating agency Icra.
The Act would bring about a paradigm shift in the way the real estate industry operates and improve the level of transparency and accountability of developers, it said.
However, "for effective implementation of the provisions, the state governments had to frame rules governing these sections and set up state-level RERA and appellate tribunals.
"So far, only seven states have notified the required rules....The absence of a regulator or appropriate rules can result in a regulatory vacuum and dilution of the Act's provisions," Icra Senior Vice President and Group Head, Corporate Ratings, K Ravichandran said in a statement here.
Except Uttar Pradesh, Gujarat, Madhya Pradesh, Maharashtra, Andhra Pradesh, Odisha, Bihar and the Union Territories, most have missed the deadline to notify rules under the Act, which was October 31, 2016.
States such as Karnataka, Haryana and Telangana have framed draft rules, but final rules are yet to be notified.
"The progress in setting up the RERA at the state level has also been slow and is likely to extend beyond the stipulated timeline of April 30, 2017," ICRA said.
Only Madhya Pradesh has set up its RERA, while some other states have set up interim regulatory authorities.
Since registration with the RERA has been made mandatory for any project to be marketed and sold, further delay in setting up regulatory infrastructure could impact real estate developers, especially in case of new project launches.
All ongoing projects (which have not received occupancy certificate) are also required to apply for registration with the RERA within three months of Act's commencement.
Customers may defer purchasing decision until a project is registered, putting pressure on the demand, ICRA said.
The Act provides that if the RERA does not reject the application for registration within 30 days, the project would be deemed to be registered. If the RERA does not have adequate resources to scrutinise applications, this may result in dilution of due diligence at the registration stage, it said.
The RERA also plays important function of acting upon complaints against the promoters, and this protection for consumers can also be weakened in case of any delay in setting up the RERA, ICRA said.
On the other hand, penal provisions such as imprisonment of promoters/employees in case of failure to comply with regulations may create excessive fear in the developer community, it said.
"As the Act is expected to bring about more transparency, stability and discipline into the sector, and thus attract better participation from prospective customers, this expectation may result in deferment of buying decisions of customers till RERA is fully set-up," ICRA Vice President and Sector Head Shubham Jain said.
The expected benefits will accrue only once the requisite regulatory infrastructure is put in place, he said.