Bengal developers fear missing real estate sops with state bypassing RERA

Topics Real Estate  | RERA | Rera Act

West Bengal's real estate developers -- registered under the state's West Bengal Housing Industry Regulation Act (HIRA) -- are all consumed by one question: whether or not the Centre's Rs 25,000 crore bailout package for the realty estate sector will apply to them.

The West Bengal government enacted its own version of the Real Estate (Regulation and Development) Act (RERA), the West Bengal Housing Industry Regulation Act (HIRA) in 2017, the only state to do so, and the Housing Industry Regulatory Authority came into effect on June 1, 2018. 

The apprehension in the sector is that the state's own Act may become a stumbling block for developers seeking to avail of the special window funding for stalled affordable and middle-income housing projects as approved by the government.

One of the criteria for selection of projects that can draw benefits from the special window funding or the proposed Alternate Investment Fund (AIF) is that they have to be RERA-registered. But in West Bengal, all projects are registered under the HIRA. 

With uncertainty looming large, the Confederation of Real Estate Developers' Associations of India (Credai) is planning to seek clarification from the Centre.

“It is unclear if projects in West Bengal will qualify for the funding. Banks have been funding HIRA-compliant projects and going by that logic, AIF should be applicable to developers in the state. We are planning to seek clarity from the government by way of an appeal,” said Nandu Belani, president, CREDAI Bengal. 

 Last week, the government proposed to create a category-II AIF to provide last-mile funding for the real estate sector. The government said it would invest Rs 10,000 crore in the fund, while Rs 15,000 crore would be pooled from domestic institutions such as LIC and other investors in a phased manner. 

N G Khaitan, Partner, Khaitan & Company, said, the AIF benefits will not be available to developers in West Bengal if their projects are not RERA- compliant. 

Debanjan Mandal, Partner, Fox & Mandal, said, "Real estate projects in West Bengal are being registered under HIRA not RERA, the central law. Hence, it appears that these projects will not be to avail of the Centre's special window funding for stalled projects since one of the eligibility criterion is that projects will have to be RERA-registered."

That may leave many projects in the lurch. According to Anarock data, Kolkata currently has more than 95,100 units under construction of which 13,000 are excessively delayed.

For quite some time, there was a lack of clarity on West Bengal’s acceptance of RERA. At least till it came up with its own version of the Act and notified it. 

HIRA diluted some key provisions of RERA. The first difference between RERA and HIRA is in the clause ‘force majeure’ or unforeseen circumstances that prevents a builder from fulfilling his obligations. 

While RERA defines such unforeseen circumstances as war, flood, drought, fire, cyclone, earthquake or any other natural calamity. HIRA also takes into account ‘or any other circumstances as may be prescribed’. 

Secondly, RERA defines garage as having a roof and walls on three sides for parking. However, HIRA has defined garage as any parking space as sanctioned by the government authority.  Hence, HIRA is a diluted form of RERA in West Bengal. 

Now, West Bengal's unique proposition - HIRA - is throwing up a problem for the developers.

Earlier this year, a forum of real estate buyers filed a plea in the Supreme Court of India challenging constitutional validity of HIRA. 

“This is an issue which we need to clarify with the government. West Bengal being the only state which has formulated its own 
version of RERA, this issue is unique to West Bengal,” said Santosh Rungta, a city-based real estate developer. 
  • Kolkata currently has more than 95,100 units under construction units
  • Nearly 13,000 units are excessively delayed.
  • In 2018 West Bengal adopted its own version of RERA

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