The just-released CRISIL Research Impact Note says that most states missed RERA deadline and that those which met it, many watered down crucial provisions of the Act. Here's the full text from the report.
Conditional coverage defies the central Act
Conditional coverage defies the central Act
Despite continuous monitoring and follow up by the Ministry of Urban Development and Housing, Government of India, only nine states (Andhra Pradesh, Bihar, Gujarat, Kerala, Madhya Pradesh, Maharashtra, Odisha, Rajasthan, and Uttar Pradesh) and six union territories (Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, Lakshadweep, and National Capital Territory of Delhi) have notified their respective Real Estate (Regulation and Development) Rules, 2017. The central Real Estate (Regulation and Development) Act (RERA) was notified on May 1, 2016, and has come into effect nationwide from May 1, 2017. States were asked to prepare and notify respective rules in tandem with the Act, so it could be effectively implemented.
CRISIL Research compared the notified state specific rules with the central Act, and found that many states have either diluted a few crucial aspects of the Act, or given insufficient emphasis to its provisions in their rules.
Summary of CRISIL Research’s assessment of state-specific notified rules
| States | Definition of on-going projects | Penalties for noncompliance | Payment schedule | Norms for escrow withdrawal | Clause for structural defects |
|---|---|---|---|---|---|
| Andhra Pradesh | Diluted | Diluted | In line | In line | In line |
| Bihar | In line | Diluted | Lacks clarity | In line | In line |
| Gujarat | Lacks clarity | Lacks clarity | Lacks clarity | Lacks clarity | Lacks clarity |
| Kerala | Diluted | In line | In line | Diluted | Diluted |
| Madhya Pradesh | In line | Diluted | Lacks clarity | Lacks clarity | Lacks clarity |
| Maharashtra | In line | Diluted | With conditions | In line | In line |
| Odisha | In line | Diluted | Lacks clarity | In line | In line |
| Rajasthan | In line | Diluted | In line | In line | Lacks clarity |
| Uttar Pradesh | Diluted | Diluted | Lacks clarity | In line | Lacks clarity |
| Andaman and Nicobar Islands | In line | In line | In line | In line | In line |
| Chandigarh | In line | In line | In line | In line | In line |
| Dadra and Nagar Haveli | In line | In line | In line | In line | In line |
| Daman and Diu | In line | In line | In line | In line | In line |
| Lakshadweep | In line | In line | In line | In line | In line |
| National Capital Territory of Delhi | In line | In line | In line | In line | In line |
Major points of disconnect:
- Definition of ongoing projects: RERA 2016 includes projects that are ongoing on the date of commencement of the Act (i.e., May 1, 2017), and for which the completion certificate has not been issued. However, Andhra Pradesh, Kerala and Uttar Pradesh have altered this definition in their notified rules.
- Penalties for non-compliance with the Act: RERA 2016 recommends imprisonment for a term which may extend up to three years, or fine which may extend up to 10% of the estimated cost of the real estate project, or both, in case of non-compliance with the Act. However, most states have added a clause of compounding of offence to avoid imprisonment.
- Payment schedule and liability in case of structural defects: According to the central legislation, the model sale agreement is required to specify 10% advance payment, or charge an application fee from buyers, while entering into a written agreement for sale. In addition, in case of any structural defects arising within five years of handing over the possession of project to buyers, developers will be liable to rectify such defects without further charge. However, there is no clarity on these clauses in most states’ RERA notifications.
State wise RERA implementation
| State | RERA notified on | CRISIL Research's comments |
|---|---|---|
| Andhra Pradesh | 27-Mar-17 | * Definition of ongoing projects: Diluted |
| Includes ongoing projects with conditions: excludes projects where roads, open spaces, amenities and services have been handed over to the local authority in layout projects, or where all slabs are laid in housing projects, or where all developmental works have been completed and sale/lease deeds of 50% of the apartments/houses/plots have been executed, or where development works have been completed and application has been filed to the competent authority for issue of completion or occupancy certificate. | ||
| *Penalties for non-compliance: Diluted | ||
| Compounding of offence clause included to avoid imprisonment; 10% of project cost as penalty. | ||
| *Payment schedule: In line | ||
| 10% advance payment, or an application fee from buyers while entering into a written agreement for sale. | ||
| *Norms for escrow withdrawal: In line | ||
| 70% of the amount realised by developers to be deposited in a separate account; withdrawal in proportion to the percentage of project completed. | ||
| *Clause for structural defects: In line | ||
| Time frame – defects arising within five years from possession; developers to rectify such defects without further charge within thirty days. | ||
| Bihar | 27-Apr-17 | * Definition of ongoing projects: In line |
| Includes projects that are ongoing on the date of commencement of the Act, and for which the completion certificate has not been issued. | ||
| *Penalties for non-compliance: Diluted | ||
| Compounding of offence clause included to avoid imprisonment; 10% of project cost as penalty. | ||
| *Payment schedule: Lacks clarity in the notified rules | ||
| *Norms for escrow withdrawal: In line | ||
| 70% of the amount realised by developers to be deposited in a separate account; withdrawal in proportion to the percentage of project completed. | ||
| *Clause for structural defects: In line | ||
| Time frame -within five years from possession; developers to rectify such defects without further charge within thirty days. | ||
| Gujarat | 29-Oct-16 | * Definition of on-going projects: Not mentioned in the notified rules |
| *Penalties for non-compliance: Not mentioned in the notified rules | ||
| *Payment schedule: Not mentioned in the notified rules | ||
| *Norms for escrow withdrawal: Not mentioned in the notified rules | ||
| *Clause for structural defects: Not mentioned in the notified rules | ||
| Kerala | 3-Feb-16 | * Definition of ongoing projects: Diluted |
| Includes ongoing projects with conditions: Excludes all on-going projects where the promoter has received all requisite approvals/permits for the development of the real estate project prior to commencement of the Act. | ||
| *Penalties for non-compliance: In line | ||
| Imprisonment for a term which may extend up to three years, or with fine which may extend up to 10% of the estimated cost of the real estate project, or both. | ||
| *Payment schedule: In line | ||
| 10% advance payment, or an application fee from buyers while entering into a written agreement for sale. | ||
| *Norms for escrow withdrawal: Diluted | ||
| 70% (or less, as notified by the government) of the amount realised by developers to be deposited in a separate account; no clarity on withdrawal mechanism. | ||
| *Clause for structural defects: Diluted | ||
| Time frame - Within five years from possession; developers to rectify such defects without further charge within thirty days. | ||
| Madhya Pradesh | 22-Oct-16 | * Definition of ongoing projects: In line |
| Includes projects that are ongoing on the date of commencement of the Act, and for which the completion certificate has not been issued. | ||
| *Penalties for non-compliance: Diluted | ||
| Compounding of offence clause included to avoid imprisonment; 10% of project cost as penalty. | ||
| *Payment schedule: Not mentioned in the notified rules | ||
| *Norms for escrow withdrawal: No clarity in the notified rules | ||
| *Clause for structural defects: Not mentioned in the notified rules | ||
| Maharashtra | 20-Apr-17 | * Definition of on-going projects: In line |
| Includes projects that are ongoing on the date of commencement of the Act, and for which completion certificate has not been issued. | ||
| *Penalties for non-compliance: Diluted | ||
| Does not mention imprisonment penalties; no clarity on monetary fines/penalties as percentage of total project cost. | ||
| *Payment schedule: In line, but with conditions | ||
| 10% advance payment or an application fee from buyers while entering into a written agreement for sale; model agreement mandates buyers to pay up to 30% of total consideration on execution of agreement, and additionally, up to 15% of total consideration on completion of plinth work. Remaining payment to be as per clauses mentioned in the model sale agreement. | ||
| *Norms for escrow withdrawal: In line | ||
| 70% of the amount realised by developers to be deposited in a separate account; withdrawal in proportion to the percentage of project completed. | ||
| *Clause for structural defects: In line | ||
| Time frame - Within five years from possession; developers to rectify such defects without further charge | ||
| Odisha | 25-Feb-17 | * Definition of on-going projects: In line |
| Includes projects that are ongoing on the date of commencement of the Act and for which the completion certificate has not been issued | ||
| *Penalties for non-compliance: Diluted | ||
| Compounding of offence clause included to avoid imprisonment; 10% of project cost as penalty. | ||
| *Payment schedule: No clarity in the notified rules | ||
| *Norms for escrow withdrawal: In line | ||
| 70% of the amount realised by developers to be deposited in a separate account; withdrawal in proportion to the percentage of project completed. | ||
| *Clause for structural defects: In line | ||
| Time frame: Within five years from possession; developers to rectify such defects without further charge within thirty days | ||
| Rajasthan | 1-May-17 | * Definition of on-going projects: In line |
| Includes projects that are ongoing on the date of commencement of the Act, and for which the completion certificate has not been issued | ||
| *Penalties for non-compliance: Diluted | ||
| Compounding of offence clause included to avoid imprisonment; 10% of project cost as penalty. | ||
| *Payment schedule: In line | ||
| 10% advance payment, or an application fee from buyers while entering into a written agreement for sale. | ||
| *Norms for escrow withdrawal: In line | ||
| 70% of the amount realised by developers to be deposited in a separate account; withdrawal in proportion to the percentage of project completed. | ||
| *Clause for structural defects: No clarity on number of years | ||
| Time frame: No clarity on number of years from possession; developers to rectify such defects without further charge | ||
| Uttar Pradesh | 27-Oct-16 | * Definition of ongoing projects: Diluted |
| Includes ongoing projects with conditions: excludes projects where: | ||
| - services have been handed over to the local authority for maintenance - where common areas and facilities have been handed over to the association or resident’s welfare association for maintenance | ||
| - all development works have been completed and sale/ lease deeds of | ||
| 60% of apartments/plots/houses have been executed; and | ||
| - where all development works have been completed and application has been filed with the competent authority for issue of completion certificate. | ||
| *Penalties for non-compliance: Diluted | ||
| Compounding of offence clause included to avoid imprisonment; 10% of project cost as penalty | ||
| *Payment schedule: No clarity in the notified rules | ||
| *Norms for escrow withdrawal: In line | ||
| 70% of the amount realised by developers to be deposited in a separate account; but no clarity on withdrawal mechanism | ||
| *Clause for structural defects: No clarity in the notified rules | ||
| Andaman and Nicobar Islands | 31-Oct-16 | In line with central Act |
| Chandigarh | 31-Oct-16 | In line with central Act |
| Dadra and Nagar Haveli | 31-Oct-16 | In line with central Act |
| Daman and Diu | 31-Oct-16 | In line with central Act |
| Lakshadweep | 31-Oct-16 | In line with central Act |
| National Capital | 24-Nov-16 | In line with central Act |
| Territory of Delhi |
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