A recent meeting of the Confederation of Real Estate Developers’ Associations of India (CREDAI) in London was dominated by discussions over the Real Estate (Regulation and Development) Act 2016, better known as RERA, with industry representatives voicing their concerns particularly over the legislation’s impact on ongoing projects.
The CREDAI delegates attending the meeting debated the changing dynamics and opportunities in the Indian real estate market — as well as the opportunities in Britain, which is keen to lure investment from India into its real estate sector.
Definition of ‘ongoing’
RERA, brought in to protect the interests of home buyers, and codify the running of the sector (with the aim of boosting investment in real estate over the long term) came into force on May 1, with individual States required to declare the rules within a 90 day period. While CREDAI has welcomed the regulations, on grounds that it will help weed out unscrupulous developers and set higher standards, its members are concerned about the provisions regarding ongoing projects, warning that it could have long term, negative reverberations for the industry, ultimately hitting supply and pricing.
Part of the problem lies around the lack of clarity on what constitutes an ongoing project said Prakash Challa, the Chairman of Chennai-based SSPDL Ltd.. He argued that the law, when it comes to ongoing projects, is actually unimplementable in several ways — ranging from the treatment of common areas in buildings to the defect liability period, to the legislation’s requirement that 70% of proceeds from the project be placed in a separate account.
Under the law, developers have 90 days to register ongoing projects, but with many States having pushed close to the deadline to declare the rules (Maharashtra was the only state to declare them from the outset), developers have been struggling to meet the 90-day registration process, leaving them potentially in breach of the legislation, and unable to market or sell their projects.
“Irrespective of what reassurances the States are giving or not giving on this count, the Act prevails, so technically speaking you are in violation,” said Jaxay Shah, the national president of CREDAI, who has called for more clarity on the rules. “We welcome RERA and we are not shying away from laws but this is a serious and most fragile situation.”
Need ‘pragmatic’ fix
“Short term there has to be a pragmatic solution for RERA on ongoing projects,” said CREDAI Chairman Getamber Anand. He argued that in its effort to protect customers, the legislation was in danger of going to the other extreme, potentially risking the long-term goal of increasing secure and affordable housing.
“In the legislation there is no place where we can go as developers, if we don’t get a completion certification in time for a completed project, there is no provision if I don’t get the electricity connection, the water for my completed project…there is a documented shortage of housing which is why we have the ambition of housing for all by 2022, but why are we actually shooting ourselves in the foot?”