Building trust among real estate buyers

• The Real Estate (Regulation and Development) Act, 2016, mandatorily requires promoters to register all real estate projects with the Real Estate Regulatory Authority (RERA) in their respective States. This registration is vital for any real estate project, because even the marketing of a project without this registration is illegal.

• The existence of the RERA and the rules which govern its procedure are important prerequisites to such registration. Almost two years have passed since the enactment of the Act, but there are still some States which are yet to put in place these basic requirements. In Kerala, for instance, there is only an authority and no rules, while in West Bengal, the draft rules haven’t been notified yet.

=> Registration and Legalities

• The period set for States and Union Territories to establish the RERA and notify the rules lapsed on July 31, 2017. In States which are yet to establish the RERA or notify the rules, a potentially massive legal conundrum has come to exist with respect to the marketing and sale of real estate projects, which have been ongoing or have been initiated after the Act came into force.

• Since no registration of these projects can be done in the absence of an authority or rules dictating its procedure, a shadow of illegality is cast over the projects for no apparent fault of either the builder or the buyer.

=> Utilising Section 91

• There is an opportunity to regularise these projects by utilising the powers granted to the Union government by Section 91 of the Act, which states: “If any difficulty arises in giving effect to the provisions of this Act, the Central Government may… make such provisions not inconsistent with the provisions of this Act as may appear to be necessary for removing the difficulty: Provided that no order shall be made under this section after the expiry of two years from the date of the commencement of this Act.”

• This provision can be utilised by the Ministry of Housing and Urban Affairs. The Ministry can issue an order regularising the marketing and sale of real estate projects in States where the regulatory authority or the rules under the Act are yet to be enacted. Any such order regularising these unregistered real estate projects will have to be laid before each House of Parliament immediately after it has been made.

• However, the time to avail of this opportunity for a preemptive solution is running out. Section 91 can be availed of only for two years from the date of commencement of the Act, i.e. May 1, 2016. This means that the window for using this option will come to a close on April 30.

=> What if not utilised?

• Squandering this opportunity will prove costly as buyers and builders will be the immediate sufferers. Revenue losses and stuck investments aside, the courts will be left to ponder a legal technicality which could in turn require amendments to the Act. Needless to say, doing the rounds of courts and waiting for Parliament to make suitable amendments is going to pummel a sector which had only begun to see an upturn. The biggest loss in this melee will be the diminishing buyer sentiment in the sector, something that the Act was brought in to remedy.

• State governments have devised ways of reducing the scope of the legislation by tweaking definitions, moved court to stall the implementation of the Act, and even put off the implementation of the Act entirely. The reluctant implementation in many States has been widely attributed to the builder-politician nexus.

=> CONCLUSION

• Stopping short of implementing the Act will adversely affect State governments and builders in the long run. Using remedies like Section 91 to regularise these projects cannot replace a secure regulatory environment in building the trust of buyer.

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