Introduction:
In recent times, our real estate industry has faced multiple obstacles. One of the industries with the biggest prominence on a global scale is real estate. For the growth of such important real estate industry, the Real Estate Regulation Act (RERA) act was passed in 2016 and came into effect in 2017. Given how the real estate market is expanding and how many investors there are, it is crucial to introduce an act. The act will help in bringing transparency in the real estate sector of India as earlier there was a lot of corruption in transactions leading to loopholes and issues. Despite the fact that such RERA act is for the public's benefit, those engaged in the real estate industry are having a plethora of issues. The RERA act has primarily focused on the public, and it is impacting the real estate sectors' economy while somehow causing them a great deal of difficulty in their company. RERA Act has brought significant changes in Indian economy and business especially during COVID-19. Although it has come into picture in year 2016 but its contribution has been substantial.
How did RERA enter the scenario?:
The housing and infrastructural needs are met in large part by the real estate industry. Consumers are experiencing problems while the market is growing due to of delay in completion or handover, refusal to accept terms, or delays in registration and a lack of industry transparency These were the biggest worries that consumers experienced, therefore the RERA was established to address them. The Ministry enacted this law to promote and control the activities of building that are either residential or commercial and are carved out across the nation in response to the widespread misuse and malpractices involved in the real estate sector. The Real Estate Bill was approved by the President on March 25, 2016, after being passed by the Rajya Sabha and Lok Sabha on March 10 and 15, respectively. On March 26, 2016, the same was released in the official gazette.
Major Provisions of the Act:
SECTION | SPECIFICS |
Section 3 | Prior registration of real estate project with Real Estate Regulatory Authority |
Section 4 | Application for Registration |
Section 5 | Grant Registration |
Section 6 | Extension of Registration |
Section 7 | Revocation of registration |
Section 9 | Registration of Real Estate Agents |
Section 10 | Functions of Real Estate Agent |
Section 11 | Functions and duties of Promoters |
Section 12 | Incorrect or False information in promotion |
Section 19 | Rights and duties of Allottees |
Section 21 | Composition of RERA Authority |
Section 38 | Power of RERA Authority |
Section 53 | Powers of Real Estate Appellate Tribunal |
Section 59 to 72 | Offences, Penalties and Adjudication |
Implications of RERA on the industry:
One of the major contributions to the Indian economy is the real estate sector. This industry contributed to the nation's growth and advancement. The RERA was developed to increase the efficiency of the business, but it has also had a major beneficial effect on the economy. Due to the implementation of RERA, the Indian economy has suffered. The primary problem with RERA's laws and regulations was that the money paid for a flat, plot of land, or structure could not be utilized for any other purpose leading to irregular flow of cash. However, it is a point of benefit from the perspective of buyers as it assures quality product with limited time. In compliance with RERA, the developer must give the client a written affidavit certifying that the legal title to the property on which the development is proposed contains valid documentation of ownership. A type of indemnity insurance that protects against loss from claims in title to holding is title insurance.
It is clear that there are certain concerns since RERA has only recently been passed, but they are issues that will benefit in the long run. It will aid in future development as well as in lowering chios. The RERA act is a law that unites all builders; as a response, there will be more competition and higher-quality construction as a result of the increased unity. Additionally, customers will have the utmost faith in the builders and the company. This will facilitate improved business. It makes sense that there may be some problems when a new law is put into effect, but in the long run, it will help the industry expand.
The Impact of RERA and COVID-19 Pandemic on Indian Economy:
A worldwide pandemic of coronavirus occurred. The real estate sector experienced significant declines, but so did other industries. The real estate industry has reached its lowest point as a result of COVID-19. Financial problems are already there in the real estate industry, and the COVID-19 made matters worse. The project is behind schedule, and people currently lack the funds to invest in properties such as buildings or plots. The lockdown had a significant impact because it had halted business. It was already difficult for the real estate industry to accept the RERA. The real estate sector has faced numerous difficulties over the past ten years, including demonetization, GST, RERA, and now COVID-19.
According to information on the state real estate regulator's website, the number of real estate projects—residential, commercial, mixed development, and planned schemes—registered with GujRERA decreased by 22.8% to 1,346 projects in 2020–21 from 1,745 projects in 2019–20. Additionally, a 28% decrease in the overall investment through these projects was suggested, from Rs 45,490 crore in 2019–20 to Rs 32,674 crore in 2020–21. The Covid-19 epidemic and the concerns it caused are blamed by real estate industry participants for the decline in project registrations.
However, following a two-year COVID slump, housing prices have begun to firm again, and unsold inventories have decreased due to an increase in demand. Despite obstacles including rising interest rates on home loans and an increase in property prices, India's residential sector has recovered this fiscal year as a result of pent-up demand and an increase in housing sales. Cement, lime, and plaster's Wholesale Price Index rose from 127.1 in December 2021 to 137.6 in December 2022, showing a rise in the cost of construction's inputs. Recent government actions, like lowering import taxes on iron ore, steel intermediaries, and steel products, will lower building costs and assist to slow the growth in housing costs.
According to the current sales velocity, the inventory overhang, which measures the anticipated time it would take developers to sell all the unsold inventory, decreased from 42 months in the third quarter of FY22 to 33 months in the third quarter of FY23. First-time home buyers were enticed to leave traditional metro areas by the hybrid work environment that allowed them to work from anywhere. As a result, there was a pent-up demand in the residential real estate markets in Tier II and III cities. The government's pandemic response measures, such as lower interest rates, lower circle rates, lower stamp duties on transactions involving the sale or purchase of real estate, and the extension of the Real Estate Regulation Act (RERA), which increased affordability, also significantly contributed to the post-pandemic recovery of the real estate sector.
Conclusion:
In order to improve the efficiency of the real estate industry, the RERA act was put into effect in 2016. Because there were no laws or controls in the real estate industry, buyers suffered greatly. The RERA was enacted to benefit the buyer and secure them with their rights and obligations. The act has altered the dynamics of the real estate business, although it is a touch too hard on the builders. There are many problems that the real estate sector is now dealing with especially after how COVID-19 pandemic impacted the sector leaving its footprints on Indian Economy. There needs no proof from the above statistics that how the pandemic along with existing new RERA guidelines have shaken the real estate sector. But gradually, the sector is recovering because through the Government and other support. The buyer's perspective has been heavily considered in the RERA statute, which has had an impact on the builders. The majority of the buyer's difficulties have been resolved, but this has caused pandemonium for the builders, who have been severely impacted.
References:
Real Estate (Regulation and Development) Act, 2016, 3rd edition KK Ramani NC Jain/ page12
Real Estate (Regulation and Development) Act, 2016, 3rd edition KK Ramani NC Jain/ pg: 35