Delays in home delivery, price escalations, and lack of accountability are some concerns that homebuyers in India face. In 2016, the Indian government enacted the Real Estate (Regulation and Development) Act (RERA) to bring in much-needed transparency in the sector. In the last five years of RERA, there have been some hits and some misses. But the issue at the core remains – providing parity between homebuyers and developers amongst others. Prior to 2016, builder-buyer agreements were heavily tilted towards developers. A lot has changed since then with defined guidelines by the Central RERA, but still, a lot needs to be done.
Typically, when a homebuyer makes a purchase, an agreement containing covenants related to the property is executed. This covers aspects like the payment schedule, size, amenities, timelines etc. Prior to 2016, it was largely unstructured and non-standardised with limited clarity on aspects related to timelines, price escalation and, changes in layout design. Post 2016, the Central RERA brought in specific guidelines pertaining to these issues. This was intended to bring in accountability and greater transparency thereby building buyer confidence in the market.
As of October 2021, more than 77,000 cases have been disposed off by RERA across the country. Some states like UP, Haryana and Maharashtra have managed to implement RERA more effectively. Most states have set up a permanent regulatory authority. Some states have modified or diluted certain stipulations. Nearly 70,000 projects and 50,000 brokers have been registered under RERA.
Top 5 states in terms of cases disposed
|
State |
Share of total cases disposed off |
|
UP |
40% |
|
Haryana |
21% |
|
Maharashtra |
14% |
|
Madhya Pradesh |
6% |
|
Karnataka |
4% |
|
Others |
15% |
Over the last few years, as states formed their own RERA policies, some guidelines were either diluted or not incorporated at all, reflecting anomalies in the builder-buyer agreement. Let’s take a look at some examples, which affect homebuyers-
- As per Central RERA, buyers’ payment cannot exceed 10% of the property’s value, at the time of signing the builder-buyer agreement. While some states have a payment schedule in place, there are some state RERAs where clarity is needed.
- Revising property delivery schedules regularly due to construction delays. This is one of the biggest concerns for homebuyers. It leads to delays in home possession, with homebuyers facing cost escalations.
- Central RERA provides that in case of any structural defect within 5 years of possession of the property, developers will be liable to rectify them. In case of default, the aggrieved allottees will be entitled to receive compensation. Some states have diluted this provision, and a few others are silent on this clause. This is significant and should be a non-negotiable clause for homebuyers.
Overall, the builder-buyer agreements need to be framed in sync with the guidelines of the Central RERA. However, there should be some flexibility (with respect to certain clauses) built in the agreements, depending on the location, and local development rules.
Uniform agreement to boost confidence
A uniform builder-buyer agreement across India will lead to more confidence amongst homebuyers. It will instill trust in homebuyers, without the fear of any unwarranted liabilities. Homebuyers will also have more faith in developers across the spectrum, and even in under-construction projects.
What more can be done?
- Ease of usage of the RERA portal
- Impart knowledge to homebuyers regarding RERA
- Provide penalty parity between developers and homebuyers (in case of delay in handover, or delays in payment by homebuyers)
- Bridge the gap between RERA and Insolvency and Bankruptcy Code
With homebuyers having a higher inclination to own homes especially after COVID, is it imperative that they trust the system. This can only come through if various facets, as mentioned above, and brought under a single umbrella. Over the last year and a half, home ownership has come to the forefront. Higher accountability will further lead to a favorable market for homebuyers, as they explore various facets to buy homes.
– By Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers
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