How Effective is RERA to Provide Relief to Homebuyers?

Dr. Ajay Kummar Pandey, Advocate, Supreme Court of India.

It is high time to analyse the effectiveness of the Real Estate Regulation Act, (RERA), which is in its sixth year of operation. The Act has three key stakeholders – government, developer and homebuyers and it seems no one is fully satisfied about it.

Is something terribly wrong with the Act, or its implementation or the stakeholders did not understand it properly and hence it requires a much bigger discussion and wide publicity?

Gaining buyers’ confidence and eliminating fly by night operators were its two key objectives. The onus was on various state governments to get this Act going in their respective states. So, let’s first examine the state of affairs vis-a vis, government.

According to government data, under this Act from May, 2016 to Jan, 2022, over 84000 cases have been disposed off across the country. The rate of disposal can’t be called satisfactory . However, states like, UP, (33,463), Haryana, (17.717) and Maharashtra, (11,231), seems to be trying hard to help the home buyers by disposing off the cases .

The states, like Telangana, UTs and many others are yet to even start. Hyderabad, which is one of the major real estate markets in southern India, witnessed a 197 per cent rise in real estate sales on a year-to-year basis in 2021 over year 2020.

But despite this Telangana, has only 400 registered projects and zero  disposal of cases. The track record of Delhi, too is not good, with only 169 disposals. Goa has 79, Kerala has 580, while Rajasthan has 1484.

The other area of key concern is payment of dues/penalty charges to home-byers from the concerned builders even after disposal of the cases. Execution delays despite favourable orders by the regulator have left people in the lurch.

The Act has many gaps, District Magistrates, for instance, don’t have an easy mechanism to recover the money from defaulting developers They also lack manpower, so it is not unusual to find homebuyers struggling  to get justice even after recovery certificates being issued from RERA.

The builders have another story to tell. They say, with most cases in National Company Law Tribunal, several projects have been stalled and despite our honest intention to complete the project and pay penal interest to home buyers for the delay, we are unable to complete the projects.

They allege that buyers are unnecessarily dragging cases to NCLT and demand that RERA should be given exclusive rights to deal with complaints related to the sector.

After the government announced a Rs 25,000-crore AIF ( last mile fund )to salvage stalled housing projects, developers are insisting that in order to make this fund work, it is highly desirable that RERA should be made the first point of complaint for homebuyers.

The present system of going to RERA, NCLT and the Consumer Forum  simultaneously for the same project is making it totally impossible to work on stalled projects, according to developers.

However, legally speaking, the home buyers are within their rights to proceed against builders in all the available forums and even initiate criminal cases against the builders, if any criminal act has been found.

In a judgement dated 2 November 2020, passed by the Supreme Court of India in the case of M/S Imperia Structure Ltd v Anil Patni and Another, (Civil Appeal No. 3581-3590 of 2020), the Supreme Court held that the redressal mechanism/provisions under the RERA, do not act as a bar to complaints under the Consumer Protection Act 1986 (CP Act).

The principals laid down in this judgement by the Supreme Court, find place in the range of earlier series of decisions passed by various High Courts as well as the National Consumer Disputes Redressal Commission (NCRDRC) which have stated that allottees/homebuyers are well within their right to avail remedies under the CP Act as well as RERA and even the Insolvency and Bankruptcy Code 2016 (IBC).

Home buyers, the last stack holder of this Act, seem to be totally lost in this seesaw battle after losing their money and crumbling under liability to pay rent, EMI and additional legal cost to get justice. Firstly, awareness among home buyers about this Act is very low.

Secondly, they seem to be totally ignorant about their duty as well as their power in this act. The Act provides for penalty on delayed payment by home buyers and even has a clause of one year imprisonment for home buyers, in case of non-compliance of RERA order.

The Act provides for establishment of a housing society within three months from the time of majority of the houses been booked. Under the Act, the houses can be booked by making an advance payment of only 10 percent of the total cost. But home buyers wait endlessly for the project to be completed, registered and handed over to them for the formation of RWA.

Actually, home buyers’ role in the project starts from the date of booking and they are supposed to keep an eye on the project, through RWA and report the matter to RERA immediately if any violation or variations are noticed from the original plan approved by RERA. But, homebuyers are approaching RERA, only in the end, when possessions are not being handed over to them, absolving their responsibility of closely monitoring the project, as provided in the Act.

A change in attitude of homebuyers and other stakeholders under this Act, especially the government is the need of hour to make RERA  more effective.  RERA is working perfectly in many other countries, especially Dubai, UAE, where projects are closely monitored on a daily basis and actions are taken by authorities on first violations itself rather than waiting till  the end for projects to be delayed.