The changing face of the realty sector
With the reckless progression of the real estate Industry in last few decades has come the legal and regulatory commitments. This led to violation of vowed timelines vis-à-vis possession of property and other related terms and conditions to own a property and subsequently a trust deficit between builders and buyers.
In recent chain of events, the aggrieved buyers decided to keep their head above the water level resulting in jamming up the National Consumer Disputes Redressal Commission (NCDRC) with lawsuits pertaining to the alleged unfair practises adopted by major real estate players.
NCDRC acting as a catalyst in fixing the balance of alleged dominance of the builders has initiated litigations. The big builders came in the focus, their names flashing across front pages of newspapers, websites and television screens across nation. These developments occurred at a time when Real Estate (Regulation and Development) Act, 2016 (RERA) was in its inception and endeavoured to strike a fair balance.
In June, 2016, a leading real estate giant in North India came under the screening of NCDRC after 50 aggrieved buyers filed complaints of delay in possession which was to be given within 24 months from the date of issuance of provisional allotment letter. NCDRC imposed a penalty of 12% per annum stating that the delay in possession amounted to cheating.
Similarly, a direction was given by the Supreme Court of India to another renowned builder group in the month of July, 2016 to deposit a sum of Rs. five crore in its registry for delay in handing over possession of apartments in one of its project, failing which the directors may be sent to Judicial Custody.
In the month of August, 2016, again a well-known builder group in North India came under the screening of Supreme Court of India for failure to give possession of apartments and was directed to deposit Rs. 15 crore to pay back the principal amount of investors who had bought flats but did not get possession on time.
Recently the Supreme Court of India has gave a stern message to a prominent real estate giant along with other major players by stating that the Supreme Court is not concerned whether developer sinks or die, but the home buyers must be paid back the money for delayed possession.
There are numerous lawsuits wherein, the court decided against the builders and gave a clear message of zero tolerance against delay of possession and other mutually negotiated terms.
After the enforcement of the Real Estate (Regulation and Development) Act in May, 2016 the dynamics of Real Estate Industry have transformed altogether. The Act is judiciously designed with the intent to protect consumer interest and enhance the accountability of builders and developers.
At the same time, there are positive developments for builders as the proposed rules under the Act would address problems faced by builders in getting sanctions and approvals from the requisite authorities in a timely and organised manner. All the permissions, statutes and certificates would be available on public domain and bring transparency.
The Act proposed to be implemented by March, 2017, would constitute authorities in each state to ensure timely execution of projects. The provisions of the Act aim to reconciliate the interests of both builders and buyers. It makes it mandatory for all residential and commercial projects to be registered with the regulator and will apply to new and on-going projects.
RERA is a major step towards the recovery and revival of real estate Industry and it will substantially reduce the trust deficit between the builder and the buyer of last few years.
The builder would be in a better state to obtain requisite licenses and registrations intending to result in adhering with the timelines and the buyers would feel more confident in buying the properties, as the transformation in system would run through the checks and balances.
The need of the hour for developers is to prepare for the modifications due to enforcement of the Act as it is applicable to all future as well as prevailing projects. Organised project planning must be taken up to avoid delays and by managing project funds efficiently.
Another important factor why enforcement of the Act is anticipated to have a great impact over the sector is the fact that currently, all major cities in India have high unsold inventory and so a simplification of registration in a statutory authority would revive the demand of unsold inventory in the residential sector.
Since the implementation of the real estate Acthas come in the picture, positivity has been instilled in the industry which is predicted to uplift the aspirations of the property buyers. Though the implementation of RERA would take its own time to create an impact on the industry, but it surely will strike the balance of parity between the builders and buyers.
The transformation in the real estate sector which may initially look painful to builders and also create short supply of new projects however, in the long run, will consolidate the status of the sector as an industry where funds will flow with ease, both institutional and individual and will finally lead to “housing for all” dream of the government.
Advocate Sudhir Mishra,
Founder & Managing Partner