RERA painpoints rankle

Venket Rao

Confusion and controversy is rife as the practical implementation  of the Real Estate (Regulation & Development) Act, 2016 (RERA) kicks off. Much of this confusion is in the case of ongoing projects. Complicating the matters further, the states have implemented or are implementing, RERA as per their whims and fancies. Strictly speaking standardisation may not be possible across the country as developmental laws could have subtle differences in different states. But there could be a better effort at standardising on the possible.

Flaw in uploading info

One of the key issues that is emerging is the way developers have filed/uploaded the information on the projects, especially about the ongoing projects. There has been an utter lack of understanding of law and to a certain extent even scant respect for it as far as this aspect is concerned. Developers have considered filing and registration process as just another approval process and have completely missed the fact that the information is going to be available in the public domain sooner or later and changing/correcting the information, once filed, may not just be that easy.

In fact, to a certain extent the state regulatory authorities were proceeding in the same old fashion. Some issues that are coming to the fore are:

Timelines for completion 

As stipulated by the Section 4 of RERA, a developer/promoter has to provide a timeline within which his project would be completed. 

This provision was correctly put in place, as it left it to the developers to provide a deadline for completion.

  It was also appropriate considering the fact that various states have different mechanisms and timelines and also have various policies for the development of townships, affordable housing etc which cast obligations on promoters for the completion of projects. 

However, developers  have simply ignored all other things and would have plainly given off-the-cuff timelines for project completion under RERA. A Knight Frank report released in August says registration data shows developers took “generous extensions” while registering projects under RERA. According to the report, 57 per cent of residential units registered have extended their timelines by over a year; while close to 30 per cent have extended their contracted project deadlines by over two years. 

This is creating a lot of unrest amongst the buyers as the timelines have been extremely stretched in certain cases of already delayed projects. The anomaly of commitment to buyers under the old agreements vis a vis the RERA completion date is causing heart burn, delayed penalties etc. The fear that ‘cause of action’ for delay under RERA would be post default thereof and enforcement of delay under old agreements would only be possible at a different forum and not under RERA is going to lead to multiple complaints and litigations.

The practical approach for the developers should have been to analyse the work done till date and drawing a detailed project development schedule taking into consideration the balance work to be done, costs to be incurred, cash flows, contingent costs, and delays etc and then provide a reasonable completion date. The authorities should have scrutinised all such disclosure made by the developers before giving clearance to the registration. But in view of the self-decalaratory tone of the provision this would have been a Herculean task. 

It may be argued that developers have got additional time for completing the projects, the purpose of RERA is not to simply penalise the developers but to bring in transparency & discipline in the sector. The purpose of bringing in 'ongoing projects' under the ambit of RERA is to enable disclosure of the current status of project from the respective of stage of development, costs incurred till date and cost and time that would be taken for completion of the project. The purpose of the exercise was to install a discipline in the developer for finishing the unfinished work.

Regulatory Authority has adequate powers under RERA. It would be flooded with complaints and surely there is going to be enough action on this front. The recourse for enforcing the existing contract may still continue to be with Consumer Courts., but a complaint under RERA has to be entertained by the Authority and quicker resolution thereunder could be expected. All this will take time in settling down.

Miles to go...

Besides these two issues, there are many other aspects, such as, requirement of registration of the existing agreements, the extent to which any such addendum needs to undergo changes, raising of demand in the interim period, guidelines for advertisements/advertising material, many other transitional and implementation issues. A special awareness effort is needed from the government/authorities to bring in clarity and standardisation.

Further, developers need to be more careful and professional. 

The closest analogy for registration of project under RERA is of public offer of securities. It may be said that every offer for sale of project is like offer for sale of securities and information being filed is filing of offer document. 

The quarterly updation is a combination of updating of the shelf Offer Document and quarterly results. 

In the context, it may be logical for RERA to contemplate the appointment of Intermediaries like in securities market. There can be Category based Certification Specialised Agencies (like Merchant Bankers) to verify, conduct diligence and certify the information/information memorandum being filed by the developer in respect of the project. In fact the agencies may be registered agencies with State regulator. There would be many more and better suggestions and clarity would emerge over the period of time, till then one can only wait.

— The writer is founder and chief executive, Intygrat Business Advisory (P) Ltd 

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Incomplete/Incorrect information by the developers

Several developers have filed the registration applications without much of homework and introspection. In certain cases information uploaded is dated instead of ‘as of date’ and in certain cases it is incomplete.  The developers have devised ways and means of their own in phasing of the project without considering various elements such as the requirement of completion for each such phase, area allocation including common areas, cash flows, cost allocations, common amenities and facilities etc. There has been no effort at actually assessing the possibility of phasing, requirement of registration of certain portion of the overall project as a separate phase or in assessing the cash flow impact on phasing. Most of the developers are not even aware of restrictions on common usage of facilities and amenities, if a project is phased. There are 

many cases where the approved drawings 

and on site construction differs or even there is complete change in plans itself. 

Expecting authorities to scrutinise all the information filed by the developer is clearly unreasonable. Also, registration with Regulatory Authority should not mean that all the information is certified as correct.