You are here: Home » Economy & Policy » Analysis
Business Standard

State-wise status of RERA: Most of them miss deadline, says report

Full text of CRISIL Research Impact Note on status of RERA

CRISIL 

real estate

The just-released Research Impact Note says that most missed and that those which met it, many watered down crucial provisions of the Act. Here's the full text from the report.

Conditional coverage defies the central Act

Despite continuous monitoring and follow up by the Ministry of Urban Development and Housing, Government of India, only nine (Andhra Pradesh, Bihar, Gujarat, Kerala, Madhya Pradesh, Maharashtra, Odisha, Rajasthan, and Uttar Pradesh) and six union territories (Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, Lakshadweep, and National Capital Territory of Delhi) have notified their respective Real Estate (Regulation and Development) Rules, 2017. The central Real Estate (Regulation and Development) Act (RERA) was notified on May 1, 2016, and has come into effect nationwide from May 1, 2017. were asked to prepare and notify respective rules in tandem with the Act, so it could be effectively implemented. 

Research compared the notified state specific rules with the central Act, and found that many have either diluted a few crucial aspects of the Act, or given insufficient emphasis to its provisions in their rules.  

Summary of Research’s assessment of state-specific notified rules

States  Definition of on-going projects  Penalties for noncompliance  Payment schedule  Norms for escrow withdrawal  Clause for structural defects 
Andhra Pradesh  Diluted  Diluted  In line  In line  In line 
Bihar  In line  Diluted  Lacks clarity   In line  In line 
Gujarat  Lacks clarity   Lacks clarity   Lacks clarity   Lacks clarity   Lacks clarity  
Kerala  Diluted  In line  In line  Diluted  Diluted 
Madhya Pradesh  In line  Diluted  Lacks clarity   Lacks clarity   Lacks clarity  
Maharashtra  In line  Diluted  With conditions  In line  In line 
Odisha  In line  Diluted  Lacks clarity   In line  In line 
Rajasthan  In line  Diluted  In line  In line  Lacks clarity  
Uttar Pradesh  Diluted  Diluted  Lacks clarity   In line  Lacks clarity  
Andaman and Nicobar Islands  In line  In line  In line  In line  In line 
Chandigarh  In line  In line  In line  In line  In line 
Dadra and Nagar Haveli  In line  In line  In line  In line  In line 
Daman and Diu  In line  In line  In line  In line  In line 
Lakshadweep  In line  In line  In line  In line  In line 
National Capital Territory of Delhi  In line  In line  In line  In line  In line 

Major points of disconnect:  

  • Definition of ongoing projects: 2016 includes projects that are ongoing on the date of commencement of the Act (i.e., May 1, 2017), and for which the completion certificate has not been issued. However, Andhra Pradesh, Kerala and Uttar Pradesh have altered this definition in their notified rules.  
  • Penalties for non-compliance with the Act: 2016 recommends imprisonment for a term which may extend up to three years, or fine which may extend up to 10% of the estimated cost of the real estate project, or both, in case of non-compliance with the Act. However, most have added a clause of compounding of offence to avoid imprisonment. 
  • Payment schedule and liability in case of structural defects: According to the central legislation, the model sale agreement is required to specify 10% advance payment, or charge an application fee from buyers, while entering into a written agreement for sale. In addition, in case of any structural defects arising within five years of handing over the possession of project to buyers, developers will be liable to rectify such defects without further charge. However, there is no clarity on these clauses in most states’ notifications.
State wise implementation

RERA


 State  notified on  Research's comments 
Andhra Pradesh  27-Mar-17 * Definition of ongoing projects: Diluted 
Includes ongoing projects with conditions: excludes projects where roads, open spaces, amenities and services have been handed over to the local authority in layout projects, or where all slabs are laid in housing projects, or where all developmental works have been completed and sale/lease deeds of 50% of the apartments/houses/plots have been executed, or where development works have been completed and application has been filed to the competent authority for issue of completion or occupancy certificate. 
 
*Penalties for non-compliance: Diluted 
Compounding of offence clause included to avoid imprisonment; 10% of project cost as penalty. 
 
*Payment schedule: In line 
10% advance payment, or an application fee from buyers while entering into a written agreement for sale. 
 
*Norms for escrow withdrawal: In line 
70% of the amount realised by developers to be deposited in a separate account; withdrawal in proportion to the percentage of project completed. 
 
*Clause for structural defects: In line 
Time frame – defects arising within five years from possession; developers to rectify such defects without further charge within thirty days.  
Bihar  27-Apr-17 * Definition of ongoing projects: In line 
Includes projects that are ongoing on the date of commencement of the Act, and for which the completion certificate has not been issued. 
 
*Penalties for non-compliance: Diluted 
Compounding of offence clause included to avoid imprisonment; 10% of project cost as penalty. 
 
*Payment schedule: Lacks clarity in the notified rules 
 
*Norms for escrow withdrawal: In line 
70% of the amount realised by developers to be deposited in a separate account; withdrawal in proportion to the percentage of project completed. 
 
*Clause for structural defects: In line 
Time frame -within five years from possession; developers to rectify such defects without further charge within thirty days.  
Gujarat  29-Oct-16 * Definition of on-going projects: Not mentioned in the notified rules 
 
*Penalties for non-compliance: Not mentioned in the notified rules 
 
*Payment schedule: Not mentioned in the notified rules 
 
*Norms for escrow withdrawal: Not mentioned in the notified rules 
 
*Clause for structural defects: Not mentioned in the notified rules 
Kerala  3-Feb-16 * Definition of ongoing projects: Diluted 
Includes ongoing projects with conditions: Excludes all on-going projects where the promoter has received all requisite approvals/permits for the development of the real estate project prior to commencement of the Act. 
 
*Penalties for non-compliance: In line 
Imprisonment for a term which may extend up to three years, or with fine which may extend up to 10% of the estimated cost of the real estate project, or both. 
 
*Payment schedule: In line 
10% advance payment, or an application fee from buyers while entering into a written agreement for sale. 
 
*Norms for escrow withdrawal: Diluted 
70% (or less, as notified by the government) of the amount realised by developers to be deposited in a separate account; no clarity on withdrawal mechanism. 
 
*Clause for structural defects: Diluted 
Time frame - Within five years from possession; developers to rectify such defects without further charge within thirty days.  
Madhya Pradesh  22-Oct-16 * Definition of ongoing projects: In line 
Includes projects that are ongoing on the date of commencement of the Act, and for which the completion certificate has not been issued. 
 
*Penalties for non-compliance: Diluted 
Compounding of offence clause included to avoid imprisonment; 10% of project cost as penalty. 
 
*Payment schedule: Not mentioned in the notified rules 
 
*Norms for escrow withdrawal: No clarity in the notified rules 
 
*Clause for structural defects: Not mentioned in the notified rules 
Maharashtra  20-Apr-17 * Definition of on-going projects: In line 
Includes projects that are ongoing on the date of commencement of the Act, and for which completion certificate has not been issued. 
 
*Penalties for non-compliance: Diluted 
Does not mention imprisonment penalties; no clarity on monetary fines/penalties as percentage of total project cost. 
 
*Payment schedule: In line, but with conditions 
10% advance payment or an application fee from buyers while entering into a written agreement for sale; model agreement mandates buyers to pay up to 30% of total consideration on execution of agreement, and additionally, up to 15% of total consideration on completion of plinth work. Remaining payment to be as per clauses mentioned in the model sale agreement. 
 
*Norms for escrow withdrawal: In line 
70% of the amount realised by developers to be deposited in a separate account; withdrawal in proportion to the percentage of project completed. 
 
*Clause for structural defects: In line 
Time frame - Within five years from possession; developers to rectify such defects without further charge 
Odisha  25-Feb-17 * Definition of on-going projects: In line 
Includes projects that are ongoing on the date of commencement of the Act and for which the completion certificate has not been issued 
 
*Penalties for non-compliance: Diluted 
Compounding of offence clause included to avoid imprisonment; 10% of project cost as penalty. 
 
*Payment schedule: No clarity in the notified rules 
 
*Norms for escrow withdrawal: In line 
70% of the amount realised by developers to be deposited in a separate account; withdrawal in proportion to the percentage of project completed. 
 
*Clause for structural defects: In line 
Time frame: Within five years from possession; developers to rectify such defects without further charge within thirty days 
Rajasthan  1-May-17 * Definition of on-going projects: In line 
Includes projects that are ongoing on the date of commencement of the Act, and for which the completion certificate has not been issued 
 
*Penalties for non-compliance: Diluted 
Compounding of offence clause included to avoid imprisonment; 10% of project cost as penalty. 
 
*Payment schedule: In line 
10% advance payment, or an application fee from buyers while entering into a written agreement for sale. 
 
*Norms for escrow withdrawal: In line 
70% of the amount realised by developers to be deposited in a separate account; withdrawal in proportion to the percentage of project completed. 
 
*Clause for structural defects: No clarity on number of years 
Time frame: No clarity on number of years from possession; developers to rectify such defects without further charge 
Uttar Pradesh  27-Oct-16 * Definition of ongoing projects: Diluted 
Includes ongoing projects with conditions: excludes projects where: 
-                      services have been handed over to the local authority for maintenance - where common areas and facilities have been handed over to the association or resident’s welfare association for maintenance 
-                      all development works have been completed and sale/ lease deeds of 
60% of apartments/plots/houses have been executed; and 
-                      where all development works have been completed and application has been filed with the competent authority for issue of completion certificate. 
 
*Penalties for non-compliance: Diluted 
Compounding of offence clause included to avoid imprisonment; 10% of project cost as penalty 
 
*Payment schedule: No clarity in the notified rules 
 
*Norms for escrow withdrawal: In line 
70% of the amount realised by developers to be deposited in a separate account; but no clarity on withdrawal mechanism 
 
*Clause for structural defects: No clarity in the notified rules 
Andaman and Nicobar Islands  31-Oct-16 In line with central Act 
Chandigarh  31-Oct-16 In line with central Act 
Dadra and Nagar Haveli  31-Oct-16 In line with central Act 
Daman and Diu  31-Oct-16 In line with central Act 
Lakshadweep  31-Oct-16 In line with central Act 
National Capital  24-Nov-16 In line with central Act 
Territory of Delhi 

Crisil, Rera, real estate, states
Click on the image to download full report

RECOMMENDED FOR YOU