News: Examining RERA's Rocky Start In NCR-19.08.2017

Examining RERA's rocky start in NCR

Rohan SharmaAssociate Director, JLL India

RERA - the latest 'Wunderkind' in the Indian real estate industry – has had a difficult birth and seems to be having a troubled childhood. The expectations from the ‘miracle child’ seem to be mired in a ‘what’s changed?’ feeling. State Governments appear oblivious to the reasons for bringing in such a revolutionary piece of legislation in the first place.

Impact lost in translation

One of the main problems is that different States have interpreted and enacted their own versions of the central RERA. Nowhere is this problem more manifest than the already notorious NCR residential markets.

NCR has for long been the largest market in terms of absolute volumes of launches as well as sales. Its share for both Pan-India launches and sales during 2010-2013 was 45% respectively. During 2014-'15, NCR's residential project launches contributed a 33.0% share to Pan-India new units supply, while corresponding contribution to sales was 28% during this period. It is only over the last 18 months that NCR’s share to launches and sales has declined to 10% and 20% respectively. 

However, the collusion of some unscrupulous developers and the authorities has led to major concerns for buyers – by far the most affected stakeholders – who justifiably believed that RERA’s enactment would give them a stronger voice and address all their grievances. Yet again, though, homebuyers in NCR seem to have been short-changed.

RERA came about primarily due to the problems being faced by existing buyers. Therefore, it stands to reason that the Act should first seek to address existing buyers’ concerns and also create a template for a protection mechanism for new buyers. It is here that the States, particularly Uttar Pradesh and Haryana, have let down the buyers.

While finger-pointing will not resolve matters, some discussion on why these States have diluted RERA’s main provision - the definition of ‘ongoing projects’; or, in other words, the section that pertains to the coverage of the Act.

Consider this…

The Central Act defined ongoing projects as those which have not yet received their completion certificates. The operative term is ‘completion certificate’ – a vital document which certifies that a project has been developed according to the sanctioned plan, including layout and specifications, as approved by the competent authority under the local laws. It is far more relevant than the occupancy certificate, which merely certifies that a project or its phase is fit for habitation with basic infrastructure such as electricity, water and sanitation.

Both Uttar Pradesh and Haryana have adopted a definition that is more exclusionary than inclusive in nature. In both States, all ongoing projects which have completed developments works and have applied for completion certificates are currently excluded from RERA coverage, unless their applications are rejected. In fact, UP has exempted projects where 60% of sale deeds have been executed, while Haryana has exempted projects with even partial completion / occupancy certificates.

In simple words, this means that projects with multiple towers of which some have been completed but project-level amenities are not yet in place or are delayed - and where even possession was delayed - are out of the purview of RERA.

Progress – or business as usual?

A spate of developers had applied for completion certificates between October and November 2016 and received them over the subsequent months. This is vouchsafed by the fact that over 21,000 apartment units were completed in Noida and Ghaziabad over the past six months and another 7,500 were completed in Gurgaon – many in projects where common facilities were not fully completed and handed over to the respective RWAs (Resident Welfare Associations).

For a residential market which has one of the worst track records for completion timelines and been the venue of innumerable consumer disputes on quality, unfulfilled promises and delays, this is another missed opportunity for the NCR real estate market to set the record straight.

Unfortunately, the disrepute that the NCR real estate market has earned itself has led to everyone being tarred by the same brush in public perception. While no one disputes that there are some bad apples in the real estate developer industry, this does not negate the fact that there are also highly reputed and very credible players who have created a distinctive brand on the back of quality, accountability, customer-centricity and fair business practices.

This fact also brings with it a reality about RERA that bears mentioning. While the whole premise of RERA is to give affected buyers a forum to air and seek redressal of their grievances, not every consumer complaint will result in an unfavourable judgement against genuine development companies whose projects have been delayed because of unforeseen circumstances beyond their control. For all consumer complaints, the relevant RERA tribunal will weigh the facts of the case and give due heed to genuine issues of such developers; for instance, undue delay by the competent authorities to issue permissions and approvals for the project, or other bureaucratic roadblocks. 

Undoing the damage

A spate of recent rejections of applications for completion certificates in Noida and Ghaziabad seems to indicate that the UP regulatory act is likely to change and follow the central law more closely. Haryana is also expected to seek expert advice after buyer protests against the diluted provisions. Definitely, the Central RERA tenet of projects which did not have completion certificates by the 31st July 2017 deadline being covered under the Act should be adhered to in the spirit of this legislation. The NCR real estate market needs to see a decisive end to the past practices which signaled collusion between shady developers and authorities.