On May 1, 2019, the Real Estate Regulation and Development Act (RERA) completed two years of its full-fledged operations in the Indian real estate industry. Termed as the answer to the endless debates on the need and application of transparency in the real estate industry, the vision, and mission of RERA has been well-aligned with the realty’s operational improvement. However, RERA’s implementation has been another story in itself.
Be it the initial compliance issues with leading builders across the nation or the impact of other revolutionary measures such as GST and demonetization, the Act has had a bumpy start followed by a smooth onset.
Followed by the massive 79% rulings in the favor of buyers by December 2017, the end of 2018 saw the Act register nearly 5,000 complaints and 3,100 passed orders. And though this can be attributed to an increase in buyers’ confidence, it further sheds light on the scope of improvement in the efficiency of the real estate industry’s functioning.
For instance, the conventional dependence on customer’s advance payment of unit booking has fundamentally changed. Tossing the ball in the builder’s court, 75 percent of the funding received for a specific real estate project has to be deposited in escrow accounts with full disclosures. While this maintains customer-dependence with a defined payment timeline, it has uprooted the builders’ old practice of distributing the advance payments across multiple projects.
In addition, multiple reforms introduced under RERA such as no layout changes and the builder fund distribution has certainly increased the transparency quotient in Indian real estate. However, if one assesses the act on the basis of prices, various reports suggest that real estate units have observed a sale drop pointing towards a not-so-seamless integration of ongoing projects with the recently introduced act.
That said, RERA is expected to fulfill its on-paper expectations with the parallel settlement of major reforms introduced in its regimes such as demonetization, GST, construction bans, and liquidity issues. Provided that the progress rate is maintained, if not improved drastically, the Act could be touted as the reasons for reformed business models in the near future.