PROBLEMS AND PROSPECTS FOR REAL ESTATE INDUSTRY IN INDIA POST RERA
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Vidyabharati International Interdisciplinary Research Journal 11(2) 195-200 ISSN 2319-4979
PROBLEMS AND PROSPECTS FOR REAL ESTATE INDUSTRY IN INDIA POST RERA
S.A. Tupsakhare1 and S.M. Khadilkar2
1
Arunodaya University, Arunachal Pradesh
2
KITs Institute of Management Education and Research (KITs) IMER Kolhapur
1
omsaisarthak@gmail.com, 2Khadilkarsm@rediffmail.com
________________________________________________________________________________
ABSTRACT
The real estate sector is the maximum revenue generating sector, and it is the most volatile sector. Any change in
government policy directly or indirectly affects the industry optimistically or adversely. Considering the rapid
urbanization in the nation, it has become of utmost necessary to supervise the industry. The sector should be
advantageous to all its shareholders and not just the developer. The real estate segment was working in a more
dangerous way where the builder could not stick to their promises of quality and delivery. Due to this, the consumer
used to face several issues. The Government of India came up with the RERA bill, which put few limitations and
evaluates all the segment shareholders. This paper analyses the Act and recommends some of the variations that can be
implemented to create the system more corporate-friendly and effective (Patel et al., 2021)..
________________________________________________________________________________
Keywords: RERA, Problems, Prospects.
Introduction scheme stuck in the lawsuit, etc. RERA seeks
to address problems like delays, price, quality
This paper aims to explain the problems and
of construction, and other variations. A real
prospects for Real Estate Industry in India post
estate development organization's promotional
RERA. It examines the chief reasons these
agent has to uphold a distinct escrow account
problems occur and their impact on the Real
to each of these schemes. At least 70% of the
Estate sector. Also, it outlines the prospects
money from investors and purchasers will have
and possibilities as an outcome of the RERA
to be deposited. This money can only be
act. The paper is based on examination and
utilized for the construction of projects and the
review of secondary data, including key
cost of land. RERA needs the builders to
provisions of the Act.
submit the original sanctioned plans for their
The Real Estate (Regulation and Development)
continuing schemes and variations later. They
Act, 2016 is an act of India's parliament. This
also have to supply particulars of income
Act is applied for the real Estate controlling
collected from allotters, how the funds are
department for guideline and advancement of
used, the period for construction, completion,
the real estate segment and to safeguard sale of
and delivery that will need to be authorized by
plot, apartment or building, as per the
an engineer/Architect/Practicing Chartered
circumstance, or sale of real estate scheme
Accountant. It will be each state controller's
effectively and transparently and to endure the
duty to record the real estate scheme and real
interest of the customer in the real estate
estate manager working in their state under
segment and to establish an arbitrating
RERA. The particulars of all the listed projects
mechanism for quick dispute release.
will be put on the Website of public access.
According to RERA, each state and union
Developers cannot invite, endorse, vend,
territory will have its controller and guidelines
propose, market, or book any land, apartment,
to administer the controller's work. Parliament
house, building, venture in the project without
has issued the guidelines for Union territories
prior registering it with the controller authority.
comprising the national capital. Numerous
Later, after registration, all the commercials
states have been notified about RERA
inviting investment will display the RERA
guidelines and hence started working
registration number (indiacode.nic.in, 2021).
accordingly, yet few states are still behind to
RERA act chiefly focuses on the customer's
get notified about it. In several places, land
main problems allied to incorrect data schemes
acquisition becomes a problem. Errant builders
by the agents, mistreatment of resources, and
frequently sell schemes to investors without
postponements in finishing real estate schemes
sanctioning plans, bad quality of construction,
(Khan, 2020).
Dec. 2020 195 www.viirj.orgVidyabharati International Interdisciplinary Research Journal 11(2) ISSN 2319-4979
agreement among developer and home
The three chief reforms are: the overview of purchaser.
GST, the launch of RERA, and the permission PAN India registration for Real Estate
of infrastructure status to reasonable housing Agent instead of state-wise registration is
schemes have had a huge and optimistic currently done under RERA.
influence on the sector. The government's Penalty of 5% on Real Estate brokers in
visualization of "Housing for All by 2022" and case of default may be reduced, as the
the grant of infrastructure status to compact, commission is not more than 2% in
reasonable housing properties observe an maximum instances.
upsurge in demand for reasonable homes. The The registration of Sale Deed, registration
RERA (Real Estate Regulation Act) was of Agreement to Sale, etc., should come
announced in 2016 to bring consistency in the under the realm of RERA (Lawzilla. in,
real-estate sector and safeguard purchasers' 2021).
interests from the misconducts of partial
developers. Nowadays, the RERA outcomes Literature Review
can be experienced as augmented transparency In this paper, Khan (2020) shows in the paper
in real-estate deals, enhanced responsibility of which aims to consider the use and allied
developers, which has led to augmented problems regarding the Real Estate Regulation
demand from purchasers (ashianahousing.com, Act (RERA). The paper's main focus is on
2021). transparency, security, executing penalties on
The real estate segment comprises several sub- errant constructors/builders, and trails the
segments like a commercial, hospitality, controlling mechanism in the sector. The
housing, retail, warehousing & logistics existing problems from the metro cities such as
contributes 6 – 7% of the nation's GDP. The New Delhi and Mumbai are also defined in this
real estate segment is the second-largest paper.
employment benefactor after agriculture In his paper, Upadhyay (2020) describes the
(KPMG, 2019). most current and famous scam that is the
Moreover, there is a high degree of Amrapali case, which trembled the entire
misperception among agents and developers on country. Due to restricted regulation in this
the aspect of the promotion of projects to segment, the purchasers had no option but to
clients. Aspects like building builder micro-site approach the NCDRC (National Consumer
limitations, limitations on selling, KYC, etc., Dispute Redressal Commission). Due to
are still unclear. There is also the foremost inadequate authorities, they were incapable of
doubt over the contracts' re-execution in case delivering needed release concerning Real
of projects where the deed is previously signed. Estate scams.
While some states are demanding for all such Patil & Mata (2019) found a terrible necessity
documents to be re-executed under the RERA, of a guiding department to supervise the
other states are excusing current agreements processes of the real estate segment. The
from this obligation. This contradiction across RERA Act influences shifting the entire
states is evidencing to be the main source of structure of the real estate segment and
misperception for purchasers of property. redefining how real estate sales must be led in
Recommendations extended by Ministry of the nation. This has not only influenced the
Housing and Urban Affairs relating to the developers' community but all the shareholders
Development of RERA, 2016: in the segment. Every shareholder, right from
the government, investor, and customers, is
The meaning of force majeure may be
unlearning the old methods of functioning and
broadened to comprise the non-availability
getting associated with RERA's new
of 'construction materials' and labor due to
approaches. So, a necessity rises to inspect this
inevitable situations, overdue approval
controlling context. The paper offers a study
from government bodies, or due to legal
carried out to discover the MahaRERA act on
order or stay.
Residential Construction schemes.
Real Estate Agents may be revived from its
responsibility upon implementing
Dec. 2020 196 www.viirj.orgVidyabharati International Interdisciplinary Research Journal 11(2) ISSN 2319-4979
Modhvadiya (2020) shows that the RERA Act comprise the technical and professional
2016 aids in safeguarding home purchasers and individuals in their firm to regulate all the
encouraging investment in the real estate required information that needs to be submitted
segment. The real estate segment is the second- to the concerned authority. All the probable
largest employment benefactor after ways of corruption in the real estate sector are
agriculture. The Government of India thrusts completely transformed and are nearly
towards reasonable housing, urban set-up, eradicated. The paper suggests that by applying
sustainable building, and smart cities. The these acts and guidelines, corruption among the
government aims to finish 10 million brokers and the developers could be seized to a
reasonable houses under PMAY by 2022. larger extent. The Stamp duty in the form of
Khot & Shaikh (2019), the Act applies to taxes could be regained. Moreover, now it
ongoing-construction schemes and new almost completely transparent procedure.
projects. Real estate managers' and agents' The paper also demonstrates that these acts and
roles have also been enclosed within the scope guidelines influenced the nation's monetary
of the Act. development in all segment sub-divisions.
Rohilla & Goel (2020) find that the key goal of Moreover, the new stamp duty and property tax
RERA is to offer relief to the purchasers from policy is influencing the costs of the properties.
the misconduct of biased builders. In case of Contrary, there are numerous other
any offense by the builder/developer, the home opportunities for investment in India. Though,
purchaser can also file a complaint to this India has a vast populace of the middle class
authorized department's executive. who search for investing in the safest choice.
Ranadive & Dare (2019) show that, due to lack Real Estate has a larger lucrative income than
of guidelines, the real estate segment's other sectors (Khan, 2020).
misconduct will be reduced by the execution of
1. Right to information about the property
RERA. After the execution of goods and The appropriate information concerning the
services tax (GST), there is an increase in real builder and property can help a purchaser in
estate schemes' costs. The paper is based on a multiple aspects. The builder is bound to share
survey method. The statistical analysis is all the details concerning the project, such as
executed in the paper by applying the plan layout, plan of implementation,
technique for order of preference by similarity completion phases, completion status, etc.
to ideal solution (TOPSIS).
Anitha &Manthiri (2019) show in the paper the 2. Standardized Carpet Area
goals to emphasize the varying situation of RERA has a uniform version of computing the
India's real Estate. The paper recommends that house/apartment's carpet area or any
the clients must be alert of the recently commercial construction. RERA describes
implemented guidelines of RERA, 2016. carpet area as 'the networkable floor area of a
Yadav, (2019), the research discovers that house/apartment, without the area enclosed by
RERA and the GST are continuously the external walls, areas under services shafts,
supervising the real estate sector. exclusive balcony or verandah area and
Ahamed (2020) finds that, lately, India's exclusive open terrace space, but comprises the
Government declared an Alternative Fund with space covered by the internal divider walls of
an initial amount of Rs 25000 Crore to recover the house/ apartment.'
up to 4.6 Lakh houses in 1600 Projects. 3. Builders will be responsible for any
Review of problems and prospects flaw/fault in the construction
Under the RERA Act, the purchaser has the
Major Prospects complete right to ask a developer to fix all the
The Real Estate Regulation and Development construction flaws. If there is any flaw or fault
Act (RERA) helps the developers have a huge in the apartment's construction, then it should
budget to construct various schemes. It is also be fixed by the concerned real estate developer.
helpful for the middle-class populace. Due to This is for the building's construction fault
The Real Estate Regulation and Development applicable up to 5 years from the date of
Act, developers are compulsorily destined to possession.
Dec. 2020 197 www.viirj.orgVidyabharati International Interdisciplinary Research Journal 11(2) ISSN 2319-4979
4. Grievances will be addressed and solved and small builders cannot earn money with
quickly: lack of methods and funds.
In case purchasers are discontented with the
4. Strong penalty
building, or if there is any other problem with If a developer fails to achieve any delivery, he
the commercial, residential property in a city can be sent for imprisonment up to 3 years or
like Mumbai, then the purchaser can approach 10% of the scheme's whole amount. This
the Appellate Tribunal. This tribunal will situation put the purchaser in worry and kept
address the case within two months. them away from their houses until the case was
5. Builders will does not be able to delay the solved. This generates tension in their lives and
projects: adversely affects their monetary crisis.
Under the RERA Act, every real estate builder
5. No cover on rental
must provide a delivery date for the handover RERA does not comprise any rental contracts;
of the possession of the buildings to the it completely depends upon the purchaser to
purchasers. If, in any case, the builder is not uphold the rental agreement, which signifies
able to finish the project until the delivery date, the agreed and disagreed part to save the
then they will have to experience consequences property and make appropriate use of it
(indiabullsrealestate.com, 2021). (LawZilla, 2021).
Problems Some of the drawbacks of RERA are for
builders as well. Builders cannot use the fund
The paper discusses few problems related to
in other schemes; hence new schemes cannot
policies implemented for the real estate sector.
be taken up on account of earlier schemes'
The timelines of sanctions by controlling
funds. Guideline needs sanctions and
authorities have not been well-defined. Any
permissions, which may result in the
postponement in sanctions from controlling
postponement of starting/finishing of projects.
authorities could influence purchasers as well.
Loss of interest of developers in Real estate
The Bill may lead to somewhat higher costs of
projects due to firm guidelines and decreased
properties due to the lessened competition.
profit. Real Estate has good employability
New project declarations might be restricted as
developers may not declare without receiving capacities, but builders are discouraged due to
RERA; hence, employment chances are lost.
sanctions, which could take 2 to 3 years.
Real Estate comprises construction materials, a
Following are some pointers explaining the
revenue source to various small- and large-
barriers of RERA, 2016, namely:
scale groups, but due to RERA, the various
1. Increase in property price new projects are reduced; hence the demand
Due to numerous external and internal factors for materials is reduced. Therefore, it affects
in the segment, it lacks money. Developers both the economy and employment.
have to look for other sources for money,
leading to an upsurge in the property's cost. Discussion
This difference affects to demand and supply The paper assessed few reports to give more
chain in this section. light on the information regarding RERA. The
report, titled 'RERA Induces Faster
2. Stagnant growth
Construction and Economic Growth,'
Due to 70% investment in an escrow account,
discovered that before 2016, the average time
there will be cash flow interruptions leading to
taken to finish up to the 1st floor of the
postponement in projects. This step is taken to
building launch used to be 21 months. Amid
seize the builder from distracting their minds to
tier-I cities, Mumbai Metropolitan Region
new schemes and finish the ongoing project.
observed the maximum drop of 63% in the
3. Supply-demand imbalance:
median time frame from1 five months to 5
Compliance with all the features will postpone
months); while Chennai observed a minimum
the project, and there will not be pre-selling of
drop that being 27% from 10 months to 7
the property. Big developers can construct 2 to
months, between 2016 and 2018. In NCR, the
3 schemes within two years; hence, it will lack
average time declined to 8 months from 17
economies imbalance due to the project period,
Dec. 2020 198 www.viirj.orgVidyabharati International Interdisciplinary Research Journal 11(2) ISSN 2319-4979
months. The paper further discloses that Conclusion
developers' augmented responsibility has given The paper was written to highlight problems
an uplift to the cement segment. Cement is a and benefits in the real estate sector after the
main component in the real estate sector and a implementation of RERA. A very optimistic
pointer of development in real Estate and impact is anticipated in the future as the Act
associated sectors (moneycontrol.com, 2021). becomes more intact. The above paper offers
Two diverse agencies do a representation of the requirement to determine the MahaRERA
law and its firm execution. There is no Act's effect on construction schemes by seeing
uncertainty that the execution of RERA has the notion of the MahaRERA Act, their live
landed various developers in imprisonment, but case studies, and analyzing the gathered
the issue of home purchasers is not resolved as information (Patil& Mata, 2019). Benefits
they are still incapable of getting possession of include simplified procedures, simple
the flats, offices, shops. Numerous developers documentation procedures, transparency,
like Unitech are providing possession without timely possessions, trustworthiness, grievance
gaining completion certificates. Moreover, the redressal. With RERA coming into execution,
possessions handed over in 2018 are forcefully customers will have a legal authority to file
getting acknowledged by the home purchasers their complaints and objections related to their
on the backdate of July 2017, the date before real estate investments. RERA will alter the
implementing RERA. So, authorities real estate industry; the customers will get an
answerable and related to RERA must come advantage by investing in a rich marketplace
out of their comforts and must implement the like India, particularly in Pune, which is a
ACT appropriately as it is required rising market for maximizing returns (Calyx
(MBAUniverse.com, 2021). Group, 2021). At the same time, some
problems and challenges need to be addressed.
However, on an overall basis, the evaluation
shows a positive for all the stakeholders
concerned.
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