Indian expats can ill afford to entrust their investments in Indian real estate to RERA, a feeble real estate regulatory body vested with no legal authority even to enforce its own rulings
BY VISHAL DUGGAL
Indian real estate is one of the most attractive investment destinations for Non-Resident Indians (NRIs). According to a report released by 360 Realtors, a realty investment advisory firm, the total NRI investment in the Indian real estate market stood at $13.1 billion in FY21 and the inflow is likely to grow 12% to reach $14.9 billion in FY22. Pertinently, the enactment of the Real Estate (Regulation and Development) Act, 2016 (RERA) is often hailed as a landmark legislation that has addressed the common concerns of NRIs investing in India’s property market.
Following the passage of RERA, overseas Indians are now no longer supposed to confront bottlenecks such as false promises, lack of transparency and a standardised process for due diligence, delay or non-delivery of projects with little or no legal recourse for property buyers. As a regulatory body is in place in the states and Union Territories of India, Indians living abroad are now no longer supposed to follow up with errant builders in their home. country. They can check for the details of projects on the websites of RERA authorities of different states.
Before RERA, it is said, buyers had no clue about how to report fraudulent cases and who to reach out to with complaints about such cases. Complaints are now filed by buyers regarding any project of any state irrespective of their own location. Since RERA is enforceable countrywide, NRIs can obtain information about various projects in different states as per their preference.
RERA is considered to be a big factor in reviving the interests of NRI investors in India’s real estate. It is said to have provided NRIs a platform to stay informed about their invested properties without being physically present there. The real estate market, which was earlier regulated under local state laws, is now governed by RERA that has made registration of projects, promoters and brokers compulsory.
Under the grievance redressal system effected by RERA, real estate developers are now responsible for non-delivery, delays, misleading advertisements, and poor construction quality, among other things.
One can go on listing the perceived benefits of RERA for Indian expats but what is the ground reality? Has RERA really made a positive impact on NRI investment in Indian real estate?
TIMELY DELIVERY OF REAL ESTATE PROJECTS
The track record of builders regarding timely project delivery has always been dismal as they either divert funds to another project or sell the project without obtaining necessary statutory approvals. Even with a regulatory body like RERA in place, buyers are still at the losing end. The RERA provision to keep 70 percent of the buyer’s payment in a separate escrow account for construction, preventing monetary misuse, is not followed in letter and spirit as ill-equipped RERA, devoid of qualified professionals, has no hawk’s eye to meticulously and strictly monitor project funds.
As per another provision, if builders fail to deliver projects on time, they are liable to refund buyers with penal interest but RERA orders, whether for delayed delivery or non-
completion of projects, are seldom followed by builders who know that RERA does not have the teeth to enforce its own verdicts. So, provision for escrow accounts has not opened up opportunities for safe and increased funding by NRIs. They should not be foolish in thinking that they can invest with peace of mind as RERA will monitor the safety of their investments in India.
The RERA Act has not been a godsend for NRIs as they still have to chase builders to get possession of their properties. They still need to push builders to complete projects as the latter have no compunction about not finishing construction within the agreed timeline. As for updates on the progress of the project, builders are adept at completing paper formalities with no tangible work on the ground.
TRANSPARENCY OF REAL ESTATE DEALINGS
Builders withhold and will continue to hide important information from buyers, and compromise on promised amenities and space. Of course, under RERA, important details such as layout plan, status of land title, and government approvals are available on the RERA website for easy access by buyers, but this information is liable to manipulation by builders as they do not reveal the amount of debt they have incurred and the health of their finances. They will claim to use the finest building material but no ground survey is carried out by RERA to check the quality of construction.
As per another provision, once a project is approved, builders are not allowed to make any changes without the written consent of at least two-thirds of the allotters, but this is usually not the case as there is no cohesive buyers’ association before the project completion, and even if there is, it is prone to internal wrangling, bickering and influence of vested interests.
To prevent malpractices in the then unorganised property business in the country, Parliament passed the Real Estate (Regulation and Development) Act, 2016 on May 1, 2016, which led to the formation of RERA authorities in the states and Union Territories. But all those responsible for the enactment of the RERA Act have done little service to the nation. For, what they birthed is a lame-duck, evasive piece of legislation that is simply not enforceable. Even now, PILs have been filed in the Supreme Court for effecting a model builder-buyer agreement and enforcing uniform RERA rules across the country, but no one is drawing the attention of the apex court to the most crucial aspect: execution of RERA verdicts — without which the net result is zero for a RERA complainant in the end. Even the country’s media is only embellishing the illusion by routinely publishing news about RERA orders and interviews of retired bureaucrats comfortably ensconced in top RERA posts, without ever grilling them about implementation of their own rulings which are stifled by the builder-bureaucrat-neta nexus!