Why Real Estate Regulatory Act may not be all that great for home-buyers
Since May 1, when the Real Estate Regulatory Act (RERA) came into force, a lot has been written about how it is the "real deal" that home-buyers have been waiting for.
With penal provisions and financial penalties outlined in the law against builders to check errant developers, RERA is no doubt the biggest reform in the Indian real estate sector.
While the challenges are many, I believe RERA is a good start that needs a harder push till the finish line.
The first hurdle is to get state governments to notify RERA. Many state governments are yet to officially rollout the Act.
| States | Ongoing projects' definition | Penalty for developers | Payment schedule | Withdrawingfunds from escrow |
| UP | Diluted | Diluted | Lacks clarity | Lacks clarity |
| Delhi | In line | In line | In line | In line |
| Rajasthan | In line | Diluted | In line | In line |
| Gujarat | Lacks clarity | Lacks clarity | Lacks clarity | Lacks clarity |
| Bihar | In line | Diluted | Lacks clarity | In line |
| MP | In line | Diluted | Lacks clarity | Lacks clarity |
| Maharashtra | In line | Diluted | With conditions | In line |
| Kerala | Diluted | In line | In line | Diluted |
| Odisha | In line | Diluted | In line | In line |
| Andhra Pradesh | Diluted | Diluted | In line | In line |
Around Delhi, while the NCR property hot belt in Noida comes under RERA laws after the UP government notified it, property buyers in Gurgaon have to wait for the Haryana government to ratify it.
So far, only 14 states and UTs have notified RERA officially, including Chhattisgarh, Madhya Pradesh, Uttar Pradesh, Rajasthan and Gujarat. But that's yet another farce, because a quick study conducted by ratings agency CRISIL (tabled above) shows that many actual provisions of RERA have been diluted.
State governments have tweaked harsher provisions when it comes to defining projects that fall under the real estate regulator, clauses for penalty, payment schedule and funds withdrawal from escrow account.
So far RERA seems to be getting lost in the bureaucratic jungle too.
Even after the notification, each state government needs to appoint a nodal agency to review cases on a daily basis. But state governments except Madhya Pradesh are yet to set the ball moving. Madhya Pradesh is the only state to have appointed a full time chairman for RERA.
So, with a toothless RERA, can the aam aadmi's home be a reality?
Also read: Why Real Estate Regulation Act is a blessing for home buyers