Shortcomings of Real Estate Regulation Act
Thesynergyonline Real Estate Bureau
NEW DELHI, MAY 10 : The Indian real estate sector is one of the biggest markets in the world. From past few years, the said sector has gone through a lot of transformation. The technological advancement and the contemporary way of conducting the business which is adopted massively by Indian realtors have brought monumental changes in the real estate market.
The second largest employer in India, the Indian real estate sector is expected to grow exponentially in the upcoming years. It is the sector which lays direct impact on the economic growth of the country. There are various factors that influence the Indian real estate sector and its development.
The sector has been facing a slump since 2012. This is due to factors like unemployment, inventory pile – up, recession, low rental yield, unclear taxes and arbitration. Themajor issue facing the sector was lack of transparency. The system was opaque with regards to price, construction delay, construction quality, ownership (title) and litigations. Of these, the biggest issue is delay in delivery of property to buyers.
During the last two decades the number of under construction properties rose to an all-time high. For a homebuyer investing his life savings in the property, indefinite delays are a cause for worry.Property agents or brokers took advantage of prospective homebuyers by misinforming them about quality of construction and completion. They misled homebuyers regarding amenities of the property. They would give assurances orally regarding property documents which were often missing or incomplete.
In order to do away with all these difficulties and to bring the developers under a strict purview and be regulated by strict regulations Real Estate Regulation and Development Act (RERA) 2016 a revolutionary act in the history of the Indian real estate sector came into effect in May1, 2017. With the introduction of the act also came its own pros and cons. The act provides greater transparency by making compulsory for the promoters to provide accurate disclosures of all the ongoing developments in the project on the website along with the display of the respective allotment number on the website. It has also made the registration compulsory for the all the projects where the total area to be occupied by the project is 1000sq meter. It has also lead to money management as now 70% of the buyers money has to be deposited by the seller into the escrow account which has to be specifically used for the developmental expenses of the ongoing project and has put a lock on the diversion of money for any other investment. There can be no issue of misleading claims as a written affidavit is to be given by the developer to the buyer regarding the time frame within which the project will be completed and handed over to the buyer.
Despite all of these benefits provided by the Act it has major shortcomings or failures which has greatly impacted the whole of the real estate sector and will cause detrimental impact on the economic growth of the country. Some of the crucial misses that came along.