In India, the real estate sector is the second largest industry which gives employment. It makes significant contributions towards the GDP but remained largely unregulated. The Real Estate (Regulation and Development) Act 2016 came into force in India on 1st of May 2017. Subsequently, India faced a massive transformation of its real estate sector through organisation of multiple processes under the regulatory authority.
Real estate can be challenging to understand for the ordinary public as there are many laws and procedures related to buying, selling, and renting of land, apartments, buildings, and housing. This is mainly why a lot of people get scammed in real estate projects and enormous levels of illegal activity takes place. Real estate laws in India are a combination of federal and state laws. This is because “land” is the subject matter for which only states can legislate, while transfer of property other than agriculture land, registration of deeds and documents, and contracts other than agricultural lands fall under state and central legislation (ICLG, 2021).
Additionally, since India is a country with diverse sects, laws relating to devolution, inheritance, etc. draw a large influence from various customs and practices. India also has a large number of laws which govern real estate such as transfer of property act, registration act, Indian contract act, etc. Among these is the real estate regulation and development act 2016 which governs the development, marketing, and sale of real estate projects to protect the interests of consumers in the real estate sector.
Why A Need for Real Estate Regulatory Authority (RERA)
For a long time, people in India had complained that real estate transactions were lopsided and heavily in favour of the developers. The Indian real estate industry had no regulator and making real estate transactions simpler, by bringing in better accountability and transparency, was required. RERA aimed to create a more equitable and fair transaction between the seller and buyer of properties. The area for properties was often calculated in three different ways namely, carpet area, built up area, and super built-up area. This created a lot of confusion among buyers as people often ended up paying more for what they actually got (News18.com, 2021). There was also a dire need to implement uniform standards across the real estate sector so as to protect consumers from manipulation at the hands of real estate agents. Therefore, with the advent of RERA, many problems related to real estate buying and selling were solved for the public.
Impact of RERA on Real Estate Industry
The impact of RERA on the Indian real estate industry came in the form of initial backlogs, increased project costs, tight liquidity, rise in cost of capital, consolidation, and increase in project launch times. Initially a lot of work has to be done in order to get the project registered and the process requires many documents and approvals. Also, the developer is required to give details of projects conducted in last five years. All this leads to delays in project implementation and kickoff. Another factor is that project costs are increased due to added fees and procedures required by the new law. Engineers, architects, and accountants need to be hired to manage different aspects of a project, and all this adds to the cost of the project. Properly checking land titles before purchasing land also raises the cost of capital of a project as advocates and legal teams have to be hired for complete checking and approval. While RERA also sets the groundwork for fast-tracking dispute resolution, the litmus test for its success will depend on the timely setting up of these new dispute resolution bodies and how these disputes are resolved expeditiously with a degree of finality. Lastly, there have been fewer project launches in the real estate sector after launching of RERA, but developers have been seen to adhere to compliances to avoid litigation. Relaxed delivery timelines for projects have also provided developers with an escape window and the market is yet to witness a landmark judgement that could set a precedent. (Housing.com, 2021)
Housing.com. (2021). All you need to know about Real Estate Act (RERA). Retrieved from https://housing.com/news/rera-will-impact-real-estate-industry/#Impact_of_RERA_onreal_estate_industry
ICLG. (2021). Indian Real Estate Laws and Regulation 2021. Retrieved from https://iclg.com/practice-areas/real-estate-laws-and-regulations/india
News18.com. (2021). RERA: What India’s First Real Estate Regulatory Act Seeks to Achieve And Why It’s Necessary. Retrieved from https://www.news18.com/news/india/rera-what-indias-first-real-estate-regulatory-act-seeks-to-achieve-and-why-its-necessary-3314984.html