On May 1, a new piece of legislation governing the real estate sector came into force. The Real Estate (Regulation and Development) Act, 2016, was drafted and passed amid great expectations; it was hoped that it would tilt the balance of power in the sector back towards purchasers of homes, and aid in the government’s efforts to clean up the sector. This might still happen. However, more than two months after the passage of the law, there are concerns that its slow and faulty implementation may cause a sustained slowdown in the construction and housing sector. The law is supposed to be fully implemented by August 1, but it is far from clear whether it will be — and, if not, what the implications will be for the real estate sector.
While RERA is a central law, its implementation requires the co-operation of state governments. The law requires each state and Union Territory to set up its own real estate regulatory authority. It will be this authority that should frame the rules under which the Act will operate in that state or Union Territory. Further, all the projects and agents operating in the state are supposed to register with this state-level regulatory authority within three months of the notification of the Act. This provides important transparency to buyers, as they can then check the details of a supposed project’s actual regulatory filings for themselves on the regulators’ websites.
However, not all states have been playing ball. Several have waited too long to release the final rules. Naturally, many projects and agents have waited as well, leading to a slow pace of registration. Nor is the law particularly well drafted. It is not a surprise that a constant drip of clarifications and changes has caused many project owners to wait and ensure that they comply with the final and updated version of the rules before registering. As of last week, therefore, only three projects were reported as having been registered in Rajasthan. In Mumbai, although there may be as many as 800 real estate projects under way in the city proper, not one had sought registration as late as last week, according to a newspaper report.
Many state governments are lagging in the full and proper implantation of the Act. As of last week, 24 of 36 states and Union Territories had not set up regulatory authorities and 16 had, reportedly, failed to notify their rules. Almost none of the states had begun to work on a website — although the Act requires the details of all registered projects and agents to be made available on such a site. In fact, many states seem to be unprepared even for manual registration. In other words, few states seem to be prepared to meet the August 1 deadline. Some major disruption of business seems inevitable for the sector. This is doubly unfortunate, given that this sector was particularly hard hit by demonetisation. The GST has, of course, introduced a new taxation regime. Consumers may continue to suffer as long as the sector is unstable and the transparency promised by the Act is not fully realised.