How RERA works in major states and its uneven operation across India

Leaky escrow accounts, delayed execution of RERA orders, inadequate administrative machinery and bias towards builders are some issues that need to be addressed in some states

Having read about the harrowing experiences of homebuyers over the past few years, Madhavi Shukla says that it was RERA that gave her quite some assurance, prompting her and her husband to take the plunge and buy their own house. After living in various rented apartments, this was a major investment for them and they did their research. The couple came across news reports of RERA's shortfallings, but feel it is far better to have protection, albeit incomplete, than having none at all.    

Not every homebuyer across India will be as lucky, though. Uneven implementation of the Real Estate (Regulation & Development) Act (RERA), 2016, means there are still gaps in its coverage. At the same time, many homebuyers are also unaware of how the legislation has been implemented on the ground and the apparatus it works through.    

How RERA has been implemented 

The central law requires each state to set up its own RERA, which can draw from the central rules applicable in Union Territories.

As on June 22, 2019, among all states and UTs, Maharashtra leads with 21,285 projects registered with its authority. Gujarat comes in second with 5,587 registered projects, while Uttar Pradesh (UP) stands third with 2,647. Given that together they account for over two-thirds of the total 41,939 projects registered, understanding how the authorities work in these states is crucial. 

Both Karnataka (2,621) and Madhya Pradesh (2,185) also have more than 2,000 projects registered each.

A state's Real Estate Regulatory Authority is established by its Housing Department through a notification, issued in exercise of the powers conferred by Section 20 of the Real Estate (Regulation and Development) Act, 2016. The authority functions in accordance with the provisions laid down in the Central Act and the rules and regulations notified by the state's Housing Department. Take the example of Uttar Pradesh. "UP RERA comes under the state government and its Housing Department is the authority's administrative head. However, UP RERA does not report to anyone in the state government. At the Centre, the Housing and Urban Development Department serves as the administrative department. UP RERA is a purely autonomous body," says Balvinder Kumar, member of UP RERA.  

"The state Housing Department is in charge of appointments. Decisions regarding the budget or which posts would be created are taken by the administrative department," he adds. This is also the case for Gujarat RERA and Maharashtra RERA, or MahaRERA.  

Where does the money come from?

RERA makes it mandatory for builders to disclose well in advance, details of the "carpet area", which is defined as the apartment's actual size, along with project specifications such as layout, design, structure, and expected date of completion. Before launching or advertising a housing scheme, projects exceeding 500 square metres, with eight or more apartments, must register with the concerned state's real estate regulatory authority. The registration of real estate agents and brokers has also been made mandatory.

With a large number of projects and agents registered, MahaRERA, UP RERA and Gujarat RERA are financially independent and don't need funds from their respective state governments. Instead, the revenue coming from registrations is enough to run their operations.  

If a state's RERA is not earning enough through registration fees, then the state government will finance the authority. "There are many states where the projects are negligible, like Uttarakhand and Delhi. There, the state government would be giving money from its own budget," explains Balvinder Kumar. 

Understanding the grievance redress mechanism

A key issue faced by homebuyers at present is the multiple forums for grievance redressal. Clarity about the dispute resolution structure among buyers would go a long way towards their mental peace.

If there is a dispute with the developer, an aggrieved buyer can approach his or her concerned RERA, which will prescribe the penalty or punishment for violations, if any. They can appeal to the Real Estate Appellate Tribunal, set up by their state government, if they are aggrieved by the decision of RERA. The buyer can also appeal in the High court within 60 days of receiving the decision of the Appellate Tribunal if he or she is unhappy with it. 

Buyers can also approach the consumer forums (National, state or district) if the builder defaults on the promises made at the time of the project's launch.

Take Maharashtra, for example. "The forums for dispute resolution are the MahaRERA authority, its adjudicating officers, the Appellate Tribunal, and the authority's conciliation forum," says Gautam Chatterjee, chairperson of MahaRERA. He explains that home buyers have the choice to approach either a consumer forum or the MahaRERA. "Forum shopping is not permitted," he adds. 

If an aggrieved homebuyer has gone to one of the consumer forums, such as the NCDRC, he or she cannot take the matter to the concerned RERA unless the case is withdrawn from the former. "Many people now prefer to come to RERA because we take comparatively far less time than the NCDRC. There it takes 3-4 years, here it takes 3-4 months," says UP RERA's Kumar.

Amarjit Singh, chairman of Gujarat RERA, says that the authority does follow the consumer forums' judgments as broad guidelines, while taking all steps to ensure that projects are completed. As an example, he refers to the National Consumer Disputes Redressal Commission (NCDRC) recently coming to the aid of homebuyers who have been struggling to get possession of their flats for years. In May this year, the apex consumer commission had determined a time period of one year for stalled realty projects, beyond which homebuyers can claim refund from builders.    

"About 845 complaints have been disposed of by us. This is about 70 per cent of all the complaints that have come to us," says Singh. He explains that while normal complaints are dealt with by members of Gujarat RERA, the adjudicator, who is a retired district judge, is brought in if there is a matter of compensation. "We also have a conciliation forum and it has been very helpful in a number of cases," he adds. 

In UP, Balvinder Kumar explains that after homebuyers file an online complaint, they are called for a hearing. "About 95 per cent of the times, either the homebuyers ask for a refund of the money deposited with the builder or for possession along with delay penalty," he says. Orders in this regard are passed by the authority, which takes a decision within 3-4 months. The decisions are taken by a Bench consisting of a single member.    

Settling amicably

Aggrieved persons have a choice to either go through the conciliation route when both parties consent to attempt conciliation or file an online complaint with their concerned RERA. Also, if the conciliation attempt fails, the aggrieved person can file an online complaint. RERAs in Maharashtra, UP and Gujarat all have a conciliation forum.  

"The conciliation forum is functioning quite successfully in Maharashtra, as in the 300-plus conciliation matters disposed of till date, over 80 per cent have been successfully resolved," says Chatterjee.   

Giving an example, UP RERA's Balvinder Kumar says that if there is a case regarding wrong maintenance charges or not getting parking facility, people might feel it can be settled through the conciliation forum. UP has a single-member conciliation forum, which is headed by a retired IAS officer at present.   

"We prefer that people go for conciliation. But there is a lack of agreement between builders and buyers. The builder resists demands such as refund or possession with delay penalty," he says. At present, UP's conciliation forum has not seen too many resolutions because it is a recent phenomenon that started just 4-5 months ago. 

The internal machinery

Chatterjee says that MahaRERA is a 100 per cent digital platform, which operates all its 16 government-to-business and government-to-customer services on online mode. "MahaRERA has a vision of zero footfall, paperless office. Following the principle of minimum government and maximum governance, MahaRERA operates with a staff strength of little over 40 people," he says. 

Gujarat RERA has a staff strength of about 70 currently. "We have a team of lawyers and CAs who are working with us to look at legal and financial aspects," says Singh. The lawyers ensure the documents are legally sustainable, while the team of CAs ensures the mandated amount of funds are kept in the escrow account and used for the concerned project only. UP RERA also has professionals for such tasks in its team. 

Under RERA, builders also have to deposit 70 per cent of the funds collected from buyers of a project in an escrow account, which means that these funds can only be withdrawn for the specific project for which they have been collected. In many earlier cases where buyers did not receive their flats, it was found that the funds had been diverted. 

Monitoring progress, keeping builders in line 

In case developers indulge in any "unfair practices" defined under the RERA Act, the authority has the right to de-register their projects. RERA also imposes a set of penalties for homebuyers, agents and developers in case of non-compliance. 

All of this requires monitoring. UP RERA has appointed PwC as a consultant to monitor the builders' quarterly progress reports -- in terms of whether it is being uploaded or not and are the formalities and compliances being met by the builder. This is based on data provided by builders online. "We have also started physical inspections recently. In the past two months, we have inspected 180 projects," says Balvinder Kumar. 

Singh says that Gujarat RERA is one of the few authorities that has introduced a separate form, in accordance with the national building code, for quality monitoring in terms of cement strength, steel strength and concrete strength, etc. Builders in Gujarat have to submit this statement, too, along with other documents. "I think Maharashtra and we are the only two RERAs which are doing this," adds Singh. Of the 1,173 projects Gujarat RERA expected to be completed by May end, 1,110 have been completed. 

MahaRERA's Chatterjee says that disclosures of complete information of over 21,000 registered projects and over 20,000 registered real estate agents in the public domain, through the MahaRERA website, has enabled aggrieved persons to file online complaints whenever they find a discrepancy or violation of the provisions of the Act. "Out of close to 7,800 complaints filed till date, MahaRERA and adjudicating officers have been able to dispose of around 5,000 cases," he adds. 

Things that need fixing 

However, problem areas do exist. Several cases of leaky escrow accounts have emerged. There is also a lack of confidence among homebuyers regarding execution of RERA orders by realty companies. It was reported in May this year that a number of RERA orders favouring the concerned homebuyers had not been executed. Under the RERA Act, an order passed by the authority needs to be executed within a fixed timeline. 

Experts have highlighted in the past how several states have also diluted the rules in favour of the builders, going against the spirit of the Act. 

All the provisions of the Real Estate (Regulation and Development) Act, 2016, came into force on May 1, 2017. Even over two years after the legislation was enacted, its implementation across the country remains uneven.    

Data from the Ministry of Housing and Urban Affairs (MoHUA) shows that as on June 22, 2019, out of the total 36 states and Union Territories (UTs), 30 had notified rules under RERA. Meanwhile, four North Eastern States -- Arunachal Pradesh, Meghalaya, Nagaland and Sikkim -- were under process to notify the rules under RERA. 

Out of the 28 states and UTs that had set up their real estate regulatory authority, 20 had "regular" authorities and eight were still making do with "interim" ones.

Out of the 21 states and UTs that had set up their real estate appellate tribunal, 13 had "regular" bodies and eight were still operating with "interim" ones.

Further, regulatory authorities of only 24 states and UTs had operationalised their websites under the provisions of RERA. 

Haryana, for its part, has two regulatory authorities -- one for Gurugram and another for the rest of Haryana. 

While RERA was not applicable in Jammu & Kashmir, the state has notified its own legislation, called The Jammu and Kashmir Real Estate (Regulation and Development) Act, 2018, on December 16, 2018, which is identical to RERA. 

Meanwhile, West Bengal has enacted its own Act -- West Bengal Housing Industry Regulation Act, 2017. However, the state has been advised by the MoHUA to notify the rules under Real Estate (Regulation & Development) Act, 2016.