As the Supreme Court scrutinises the implementation of RERA rules by states, if remains to be seen whether the Centre will succeed in ensuring that vested interests do not succeed in defeating the very purpose of the landmark realty legislation
BY VISHAL DUGGAL
It has been more than five years since the coming into force of the Real Estate (Regulation and Development) Act, 2016 from May 2017, followed by the gradual establishment of respective RERA authorities in states to bring in accountability and transparency in the country’s real estate market. But the Act, that seeks to provide a robust regulatory framework to the real estate sector, has not been uniformly implemented with many states resorting to dilution of various RERA provisions. Significantly, the Supreme Court (SC) is currently examining the issue of pan-India undiluted implementation of RERA rules so that good governance in the realty sector could become a reality.
A bench of Justices D.Y. Chandrachud and Surya Kant on February 14 directed the Ministry of Housing and Urban Affairs (MoHUA) to examine whether the rules drawn up by various states under RERA are in conformity with the central legislation. The bench appointed advocate-on-record Devashish Bharuka as amicus curiae in the case.
The lack of uniform implementation of RERA rules came up when a PIL was filed by advocate and BJP leader Ashwini Upadhyay, seeking the SC’s direction to all states to enforce a model builder-buyer agreement (BBA) and a model agent-buyer agreement.
“Promoters, builders and agents use manifestly arbitrary one-sided agreements that do not place customers at an equal platform with them, which offends Articles 14, 15, 21 of the Constitution. There have been many cases of deliberate inordinate delays in handing over possession and customers lodge complaints but the police don’t register FIRs, citing arbitrary clauses of the agreement,” the PIL had said.
The SC asked the central government to re-examine the symmetry of general RERA rules, including that pertaining to the BBA, in laws framed by states. The issue has been taken up by the Central Advisory Council (CAC) functioning under the MoHUA. Hardeep Singh Puri, the Minister of Housing and Urban Affairs, while recently chairing a meeting of the CAC, said that states that were diluting the RERA rules would be answerable to the SC.
Homebuyers are represented in the CAC by Abhay Upadhyay, president, Forum for People’s Collective Efforts (FPCE), a panIndia body fighting for the implementation of RERA in letter and spirit.
INSTANCES OF DILUTION
States have diluted the rules on various counts such as the rate of interest payable to allotees when they seek to withdraw from the project, in case of misleading information by the builder; failure of the promoter to follow delivery timelines or hand over possession of an apartment, plot or building to buyers. A case study done by Shripad S. Merchant, Dr D.B. Arolkar and Dr Rajesh Pednekar listed the various dilutions of RERA provisions by states:
Ongoing projects: In Haryana, ongoing projects are those where licence was granted on or before May 1, 2017 and where development work is yet to be completed. This means that projects which are still not complete but had got the licence before May 1, 2017, do not fall under the purview of RERA.
Similarly, in Andhra Pradesh, projects that don’t come under RERA are those where, on the date of notification of the rules, development work was completed and application filed for issuance of completion or occupancy certificate; slabs were laid; roads, open spaces, amenities and services were handed over to the local authority in layout projects; and sale or lease deeds of half (50 percent) of the units (apartments, houses or plots) were executed.
Project extension: The RERA provision that no extension can be given to a project beyond one year has been grossly diluted by states. In Bihar, Karnataka, Madhya Pradesh, Rajasthan, Odisha, Andhra Pradesh, Uttarakhand, Uttar Pradesh, Tamil Nadu, Chhattisgarh and Telangana, the extension depends on time allowed for completion under local laws, which defeats the spirit of RERA. In Kerala, extension for the project depends on the consent of the majority of the allottees.
Even as the central piece of legislation prevails, the states have meddled in the matter against consumer interest by granting extension for completion of the project as per the local laws.
Project size: RERA excludes projects not exceeding 500 sq. m of land and not having more than eight units. However, Kerala has excluded projects not exceeding 1,000 sq. m of land and 12 units from the purview of registration under RERA. The projects whose carpet area is less than 3,000 sq. m on a plot of less than 1,000 sq. m are exempted from the notified state law.
Penal provisions: RERA empowers the states to compound the offences by fixing penalties to be paid by the promoters. Bihar, Madhya Pradesh, Odisha, Andhra Pradesh, Uttarakhand, Uttar Pradesh, Himachal Pradesh, Chhattisgarh and Telangana have fixed 10 percent fine instead of imprisonment. Rajasthan has fixed it at 5 percent. Gujarat and Haryana have fixed it at between 5 percent and 10 percent. In Gujarat, the state government can amend the quantum of penalty to be paid for compounding the offence.
It is clear that the different rates of penalty, instead of imprisonment, do not serve as a deterrent for defaulting developers across the country. Moreover, even 10 percent of the cost of the project may be a meagre penalty when the cases drag on for a number of years in the court while the real estate prices escalate.
Escrow account: RERA stipulates that 70 percent of the amount deposited in an escrow account for construction of the project can be withdrawn only after completion is certified by the engineer, architect and chartered accountant. This withdrawal should be in proportion to the completion of the project. But there is no provision in the RERA rules issued by state governments to punish the professionals if they fraudulently certify that the work has been completed. There is also no clarity on the quantum of proportionate completion of the project.
Overall, Parliament’s initiative to regulate the real estate business has hit a roadblock due to the reluctance of state governments to establish fair practices in real estate. The dilution or modification of rules by them does not fulfil the purpose of the central Act.
Though the powers of the states under RERA are limited, they have diluted the provisions while notifying the rules that take the sting out of the Act. As the apex court examines the RERA rules of states, the central government has to come out with clear directives to achieve the objective
behind the law. The real estate domain in the country cannot be made conducive for robust growth without enforcing the true spirit behind RERA.