Contents

1. Understanding RERA
1.1 Key provisions …………………………………………………………. 2
1.2 Features ………………………………………………………………... 3
1.3 Non-compliance …..…………………………………………………… 4

2. Impact
2.1 Residential and commercial market …..……………………………. 6
2.2 Property prices ………………………………………………………… 7
2.3 New launches …..…………………………………………..…………. 7

3. Advantages
3.1 Homebuyers …..………………………………………………………9
3.2 Developers …..…………………………………………………………10
3.3 Other stakeholders …..……………………………………………10

4. Challenges
4.1 What's missing in the Act? …..……………………………………….11
4.2 Socio-economic stallers …..…………………………………………..11

5. News & Views

5.1 Implementation progress …..………………………………………...13
5.2 State-wise updates …..………………………………………………..14
5.3 Industry reactions …..………………………………………...............15

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 Chapter 1: UNDERSTANDING RERA
The Real Estate (Regulation and Development) Act, 2016, was formulated to safeguard the interest of
homebuyers and to infuse transparency and credibility into the otherwise unregulated real estate sector.

The Bill was passed by the Rajya Sabha on March 10, 2016, and by Lok Sabha on March 15, 2016, after
multiple amendments to the regulations. While 59 of the 92 sections were notified earlier in 2016, the
remaining were notified in March 2017, before the Act was finally executed on May 1, 2017.

1.1 KEY PROVISIONS

What are the key provisions pertaining to registration of real estate

projects?

The key provisions included in the Act, notified by the Government of India, are mentioned below.

 The Act mandates all commercial and residential real estate projects larger than 500 sq m, or eight
apartments, to be registered with their respective state’s Real Estate Regulatory Authority (RERA) before
being launched.
 Ongoing projects without Completion Certificates (CC), as on the date of commencement of the Act, will
have to file for registration within three months. The authority will have to either accept or reject the
application within 30 days. Post acceptance of the registration request, the promoters will be required to
present all the relevant details about the project on RERA’s official website.
 The failure to register a project would attract a penalty of 10 percent of the total project cost or an
imprisonment of up to three years.
 Real estate agents, facilitating the sale or purchase of realty projects, too, will have to register themselves
with the authority.

How does the Act promote transparency in realty industry?

RERA mandates all builders to submit original, approved plans of their ongoing projects to the regulatory
authority, including the details about the alterations made later. In addition, they will have to furnish
details of revenue collected from allottees and utilisation of funds, along with and construction, completion
and delivery timelines certified by an authorised engineer, architect or a practising chartered accountant.
Moreover, in order to enable homebuyers to make informed decisions, the real estate regulatory
authorities will have to ensure publication of information relating to each builder’s profile, track record,
litigation details, advertisements and prospectus of their projects, details of plots and apartments, details
of registered agents, consultants and promoters, status of approvals, layout plans etc.

What is an Escrow account under RERA?

The promoter/developer of a real estate development firm will have to maintain a separate escrow
account for each project. A minimum of 70 percent of the total funds collected for a specific project will

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 have to be deposited in that account and used only for the construction or land cost pertaining to the
same project.

What are the changes proposed with respect to super-built up area?

Promoters of real estate projects will have to charge buyers only on the basis of carpet area, unlike the
earlier practice of charging on the built-up or super built-up area. In addition, the Act bars a promoter from
taking higher than 10 percent of the total cost of apartment, plot or building, as an advance payment
without entering into a written agreement of sale.

What are the mandates pertaining to modification of sanctioned plans?

The Act restricts the developer or promoter from making any alterations or additions to the sanctioned
plan of the apartment, building or common areas without written consent of at least two-third of the
allottees of the residential projects.

What is an Appellate Tribunal? What are its key functions?

The Act enforces the establishment of appellate tribunals under the respective state regulators. The
tribunals will be required to settle grievances and complaints within 60 days from the date of filing.

The Act, which aims to bring transparency into the real estate sector, also outlines the penalty clauses for
developers in case of structural defects or delay in project delivery; and for buyers in case of failure to
make payments in time. The states have been mandated to notify their separate RERA regulations
inspired by the ones notified by the Central government.

1.2 FEATURES

What makes a project RERA-complaint?

 A project should have received all requisite approvals before being advertised or sold.
 Information pertinent to sanctions, completion timeline and master plan should be disclosed.
 A separate escrow account for each project should be maintained with 70 percent of funds as advance
deposits.
 Each unit should be sold as per the carpet area instead of built-up area.

When can a homebuyer take action against a builder/developer?

The Real Estate (Regulation and Development) Act clearly empowers a homebuyer to take legal action or
seek redressal in various scenarios, some of which include –

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 The builder/promoter/agent has not registered the advertised real estate project with the state’s regulatory
authority
 The builder/promoter/agent has presented false information to the regulator or contravenes any
provisions of the Act
 The builder/promoter insists on charging on built-up or super built-up area
 The builder alters the apartment or building plan without seeking consent of two-third of the total allottees
of the project
 The builder/promoter fails to deliver the project within the scheduled timeline

The apartment or building witnesses structural defects within five years from the date of possession.

1.3 NON-COMPLIANCE

What can non-registration or non-compliance with RERA imply?

Non-compliance with RERA rules will attract penalties for all stakeholders including developers,
promoters, agents and buyers.

Here is a brief account of penalties involved in various cases –

 The builder/promoter will be liable to a penalty of 10 percent of the estimated cost of the project, if they
fail to register as per the Act. A continued violation can attract an imprisonment of up to three years or
both.
 The RERA holds the right to revoke the registration of a project, builder, promoter or agent if they default
in keeping with the rules of the Act, violates any of the terms and conditions of approval given by the
competent authority, or is involved in any kind of unfair trade practice. Registration of either of the parties
or the entire project will be revoked only after giving a one-month prior notice.
 The promoter and agent will be slapped a penalty of five percent of the project cost in case they provide
any false information or contravene any provisions under the Act. Failure to comply with the orders of the
Appellate Tribunal would increase the penalty to 10 percent of the project cost and may even lead to an
imprisonment of up to one year.
 The allottees, too, will be liable to a penalty of five percent of the cost of apartment/property, if they fail to
comply with or contravene any orders, decisions or directions of the Authority. The penalty can go up to
10 percent of the cost of apartment/property or lead to an imprisonment of up to one year in case of non-
compliance with the orders or decisions of the Appellate Tribunal.

How does RERA plan to handle project delays?

 If the homebuyer wishes to withdraw the investment, the promoter must return all the funds collected so
far, along with the applicable interest as prescribed under the rules and compensation as arbitrated by an
adjudicating officer.
 If the homebuyer wishes to stay invested, the promoter must pay the interest for every month of delay as
compensation.

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What are the mandates pertaining to structural defects in the project?

The promoter will have to rectify any structural defects, caused by poor workmanship, quality or provision
of services, brought into notice within five years from the date of possession. The rectification would not
attract any additional charges from allottees and will have to be carried out within a span of 30 days from
the date of filing of the complaint. Failure to do so will entitle the allottees to seek relevant compensation
as mentioned in the Act.

Will the allottee be penalised in case of delayed payments?

In case of a delay in payment from the allottee, the Act enforces similar stringent action. The allottee will
be liable to pay a similar monthly interest as compensation to the promoter if they default in making timely
instalments. Continued violations post issuance of a notice give the promoter a right to terminate the
allotment of property and refund the amount collected after deducting booking amount and interest.

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 Chapter 2: IMPACT
2.1 RESIDENTIAL AND COMMERCIAL MARKET

How will RERA impact the residential under-construction market?

The impact of RERA on under-construction residential projects can be understood separately for ongoing
and new projects.

 Delay in completion of ongoing projects: RERA vanquished the concept of pre-launches, resulting in
significant liquidity constraints for the developer community.
 Completion certificates: Several developers rushed to acquire Completion Certificates to avoid
defaulting as per the regulations of the Act. The grant of partial Completion Certificates, especially for
large township projects, reflected in the market statistics as several projects across cities were deemed
'completed' in the last two quarters.
 Buyer sentiment and sales volume: The penalty clause over delayed projects impacted the buyer
sentiment for both ongoing and new projects. Sales volume was disrupted across cities as buyers took a
back seat in anticipation of RERA. This worsened the situation of piling under-construction inventory and
kept property prices in check. Post the implementation of the Act, the new projects market is expected to
regain its popularity as enhanced confidence in the sector might draw investors back to the forefront.

How will RERA impact the residential ready-to-move market?

 Sales in the ready-to-move residential market plunged as buyers remained wary of real estate as an
investment tool. Enquiries from end-users, however, remained high for this category as compared to
under-construction units.
 This led to a surge in rental activity across cities, especially those driven by the IT/ITeS industries
including Delhi NCR, Mumbai, Bangalore, Pune and Chennai.
 Ready properties in proximity to transit corridors continued to attract potential homebuyers and command
a premium over under-construction properties or those situated in new developing areas. The ready
residential stock is expected to remain popular amongst homebuyers, post the implementation of the Act.

How will the Act impact commercial real estate?

RERA’s impact on the commercial market is expected to trickle down to all stakeholders including retail
investors, developers and office space occupiers.

 Retail investors, the major takers of under-construction projects for the purpose of assured returns, will
now have undisputed access to comprehensive and transparent information about the developer, their
track record and financial stability. This would create pressure on Grade A and B developers and might
result in a decline in the number of projects offering assured returns in both tier-I and tier-II markets.
 In the case of office space occupiers, RERA will provide the much-required clarity in terms of building
layout plans, available services and statutory approvals. The enhanced organisation in the industry may

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also lead to space standardisation in the future. The stiff competition between Grade A and B developers
may result in increased supply of quality office spaces, opening up a wider array of options for global
occupiers.

For commercial developers, RERA would mean greater compliance and easy transmission of project
details to both the government and customers

2.2 PROPERTY PRICES

Immediate impact

The anticipation of enhanced transparency and credibility across the real estate sector on the back of
RERA has helped metro cities maintain buoyancy in property prices despite soaring residential stock and
flagging buyer sentiment since the last one year. Subsequent to its implementation, buyers are expected
to return to the market with renewed enthusiasm. However, an immediate upward thrust to property prices
is not on the cards unless the existing stockpile is cleared.

Mid-term impact

The growing confidence in the sector is expected to provide a fillip to institutional funding, resulting in an
access to price-competitive options. This, too, will lead to a rationalisation of property prices in the mid
term.

Long-term impact

The additional costs pertaining to registration and approvals under RERA are expected to give a thrust to
the compliance costs for realtors. This may result in an overall hike in the project cost by approximately
10 percent. Restriction on cash flow from the escrow account, check on the sale of open car parking
spaces and the requirement to transfer common areas to housing societies are a few other factors that
may result in a price hike of new projects. Premium projects from established developers are expected to
command higher prices, while the market will be absolved of fly-by-night fraudulent players.

2.3 NEW LAUNCHES

Before the implementation

Ambiguity over RERA and its regulations led developers to take a back seat in launching new residential
and commercial real estate projects. Therefore, new launches, across budget segments and metro cities,
plunged in the last two years. Developers, in fact, shifted focus towards completing pending projects and
acquiring Completion Certificates to avoid falling in the ambit of RERA.

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Post-implementation

Builders are expected to bounce back with newer strategies and RERA-compliant projects in the market.
However, launches will now be delayed due to increased compliances under RERA. Conversion of land-
use patterns, acquisition of development approvals and environmental clearances, and subsequent
application for registration with the state real estate regulatory authorities would prolong the project
launch time to at least 10 months. The increased compliances are also expected to have a bearing on the
total project cost and, thus, may result in a surge in property prices of new projects.

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 Chapter 3: ADVANTAGES
3.1 HOMEBUYER
The Real Estate (Regulation and Development) Act, 2016 is aimed at protecting homebuyers. To this
end, it vests power in the hands of customers to help them make informed decisions, seek solutions and
get the required compensation for any injustice meted out to them by sellers.

Access to detailed information

The mandatory registration of projects, developers, promoters and agents with the real estate regulatory
authorities will allow buyers the access to detailed information on a public domain.

Increased transparency

Easy access to information will give a thrust to housing demand in projects by established developers and
will eliminate fraudulent fly-by-night players, thus making the market more organised.

Fair compensation for project delays

The Act will take stringent action against builders who actively delay projects as this impacts the financial
stability of homebuyers. It imposes heavy penalty on developers for failing to meet deadlines. Buyers will
be entitled to know the stage-wise time schedule of project construction including the status of water,
sanitation and power. Further, the Act entitles homebuyers to claim possession of property along with
completed common areas such as parks, clubs, internal roads etc.

Fair pricing and refund policy

The regulation mandates developers to charge only on the basis of carpet area. This will ensure that
buyers pay for only what they purchase which is expected to reduce the overall financial burden. In
addition, RERA also specifies that if a buyer wishes to cancel the booking, the developer will have to
refund the amount, along with interest, within 45 days. This provision safeguards the buyers from
inordinate delays in the refunding process.

Fast-tracking of grievance redressal

Further, the establishment of an appellate tribunal under state-wise RERA is also a relief to the buyers
who have been troubled due to long-pending cases and inefficient grievance redressal. The mandate to
settle all cases within a span of 30 days will help homebuyers regain confidence in the judicial system
and reinstate their interest in realty investments.

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3.2 Developers
The Act aims to bring credibility into the currently unorganised real estate sector. For this purpose, the Act
elaborates several points, keeping in mind the rights of every stakeholder, including developers.

Penalty on payment defaulters

While the Act imposes a stringent penalty on developers for delaying construction of realty projects, it
also penalises the buyer for delayed instalments. Incessant delay despite a prior notice empowers the
developer to cancel the booking and refund the amount to the buyer after deducting booking amount and
interest.

Extension of project registration and relaxation of penalty norms

The Act provides for an extension of registration for realty projects fewer than two circumstances. First, in
the case of force majeure, which means a case of war, flood, drought, fire, cyclone, earthquake or any
other calamity caused by nature impacting the regular development of a real estate project. Second,
under reasonable conditions where there is no fault of the promoter. In this, the reason for a delay, not
exceeding one year, will have to be based on facts and recorded in writing.

Enhanced housing demand

The Act is anticipated to fuel housing demand and, thus, accelerate absorption of unsold housing units.
Hence, developers will be the immediate beneficiaries of the renewed confidence in the sector.

3.3 Other stakeholders - brokers, consultants, investors

The brokerage business is highly unorganised in India. The need to register with the real estate authority
will give a new lease of life to the brokerage business and instil professionalism into the sector.

The establishment of the Central Advisory Council for the government to understand the issues pertaining
to the real estate sector will give brokers and agents a formal platform to raise their concerns and build a
reputation among builders and homebuyers. Further, the Act mandates brokers to undergo training
courses before getting a brokerage license registered under RERA. This will allow small-time brokers to
undertake formal training and build a credible business.

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 Chapter 4: CHALLENGES
4.1 What’s missing in the Act?
The RERA Act is all-encompassing and aims to make the sector a fair ground for all stakeholders
including buyers, developers, promoters and agents. However, amidst the several positives, the Act is
believed to have certain loopholes.

No rules for delayed project approvals: RERA lays emphasis on penalising developers for untimely
project deliveries. However, a majority of the delay in execution of projects happens during the process of
acquiring approvals and clearances from various authorities. Currently, there are close to 50 odd
approvals that developers need to obtain before launching a project. The average time for acquiring all
the approvals can range from 1-2 years. The Act does not make the government agencies accountable
for the delay and places complete responsibility on developers. It lacks a stringent policy to force
authorities to meet timelines or fasten the process of granting approvals.

No provision for a single window clearance: While the Act asks for a formation of a regulatory body, it
does not give clarity on establishing a single window clearance mechanism, something that the industry is
asking for a very long time.

Lack of strict deadlines: The central government has been lenient with the states regarding the
deadline to draft RERA rules and their compliance with the Centre’s regulations. Of the 14 states that
have met the deadline, almost all have diluted certain rules, thus, defeating the purpose of strengthening
the real estate sector.

Ambiguity over state-specific content: There are certain provisions in the RERA drafts of various
states that lack clarity. For instance, the rules framed by Delhi, Karnataka, Haryana, Gujarat, Tamil Nadu,
and Uttar Pradesh do not specify the form and content of audit certificates to be issued by architects,
engineers and chartered accountants. This may lead to overlapping and duplication of roles of the various
stakeholders and might lead to inconsistent verdicts. A few states have also failed to give detailed
information about the paperwork and the fee required to be submitted for the registration of real estate
agents.

A few other points where the Act lacks clarity is the definition of land cost, construction cost and whether
garage space can be sold to an allottee.

4.2 Socio-economic stallers

While RERA is a radical reform, there are several socio-economic impediments to its success. Here’s a
list of the few major ones:

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1. Establishment of the requisite Information Technology (IT) infrastructure for digitalisation of the key
processes in the States has been identified as one of the hurdles towards ensuring the successful
implementation of RERA.
2. In the case of several states, a formal authority to implement the rules and regulations of the Act has not
been constituted yet. So, a developer who has to get his project approved would not know who to
approach for clarity. Under such circumstances, a developer can easily lose out on revenue, thus profits.
3. The inability of states to meet deadlines and draft rules in tandem with that of the Centre’s will also prove
to be a major deterrent. A number of states have diluted RERA norms in order to protect the interest of
the developer fraternity.

For instance, Uttar Pradesh has set forth certain exemptions to the application of the law to ongoing
projects. One such legally questionable norm includes the use of ‘partial completion certificate’ issued
under the provisions of the Uttar Pradesh Apartment Ownership Act, 2013. Technically, this is could be
called a ‘dilution’ of the spirit of the law, something that other States may also be trying to do to protect
the interest of developers.
Again, with respect to Uttar Pradesh, while the law permits the establishment of two or more authorities
within the state for better geographical coverage and speedy disposal of cases, the state has elected to
constitute only one such authority in Lucknow.

The largest number of new real estate projects within Uttar Pradesh would arguably be within the
district(s) of Ghaziabad and Noida as part of the National Capital Region (NCR), yet the developer of a
project launched would have to seek approval all the way from Lucknow (even though other approvals
are generally local).

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 Chapter 5: NEWS & VIEWS
5.1 IMPLEMENTATION PROGRESS

The Centre declared October 31, 2016, as the last date for all states to notify their respective regulation
under RERA. Only nine states, however, have outlined their rules, so far. The states were mandated to
prepare their rules in tandem with the Centre’s regulations but several dilutions have been observed, as
well.

Here’s state-specific information about the timelines for notifying RERA and their compliance or deviation
from Centre’s regulations.

States Rules Regulatory Definition Penalties for Payment Norms for Clause
notified on Authority of on- non- schedule escrow for
going compliance withdrawal structural
projects defects
Andhra Pradesh Mar 27, Diluted Diluted In line In line In line
2017
Bihar Apr 27, In line Diluted Lacks In line In line
2017 clarity
Gujarat Oct 29, Lacks Lacks clarity Lacks Lacks Lacks
2016 clarity clarity clarity clarity
Kerala Feb 3, ✓ Diluted In line In line Diluted Diluted
2016
Madhya Oct 22, ✓ In line Diluted Lacks Lacks Lacks
Pradesh 2016 clarity clarity clarity
Maharashtra Apr 20, ✓ In line Diluted With In line In line
2017 conditions
Odisha Feb 25, In line Diluted Lacks In line In line
2017 clarity
Rajasthan May 1, In line Diluted In line In line Lacks
2017 clarity
Uttar Pradesh Oct 27, Diluted Diluted Lacks In line Lacks
2016 clarity clarity
Andaman and Oct 31, In line
Nicobar Islands 2016
Chandigarh Oct 31, In line
2016
Dadra and Oct 31, In line
Nagar Haveli 2016
Daman and Diu Oct 31, In line
2016
Lakshadweep Oct 31, In line
2016
National Capital Nov 24, ✓ In line
Territory of 2016
Delhi
Source: Crisil

For more details, contact content@99acres.com

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5.2 STATE-WISE UPDATES
Are you looking for the latest information and news pertaining to RERA implementation in your State?
Get a detailed report by clicking on the States or Union Territory below:

Andhra Pradesh Andaman and Nicobar Islands Bihar Chandigarh

Gujarat Kerala Madhya Pradesh Maharashtra

Odisha Pan India Rajasthan Uttar Pradesh

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5.3 INDUSTRY REACTIONS
While RERA promises to metamorphose the Indian real estate space into an organised, transparent and
profitable sector, the hiccups in the initial stages of implementation are unavoidable. To offer an
exhaustive understanding of the revolutionary Act and gauge its holistic impact, 99acres interacted with
renowned real estate consultants – JLL, Colliers, Knight Frank, CBRE, Cushman and Wakefield. We also
collaborated with developers’ association such as CREDAI and brokerage firms in order to understand
the process and prospects of RERA implementation. These industry stalwarts discuss, debate and lend a
comprehensive insight into the benefits and downsides of the Act.

Click on the tabs below to develop a deeper understanding of the policy, which has taken the Indian real
estate sector by a storm.

Experts’ Interviews

Gaurav Sawhney, President Sales, Piramal Realty

Rahul Shah, CEO, Sumer Group
Kaizad Hateria, Brand Custodian and Chief Customer Delight Officer, Rustomjee Group
Manju Yagnik, Vice Chairperson, Nahar Group
Amit Modi, ABA Corp and Vice President, CREDAI Western UP
Navin, Director, Navin's
Ssumit Berry, MD, BDI Group
Jaxay Shah, President, CREDAI
Bijay Agarwal, MD, Salarpuria, Sattva Group
Pratik K Mehta, MD, Unishire
Sunil Sharma, VP-CRM and Marketing, Mahindra Lifespaces
Rakesh Reddy, Director, Aparna Construction and Estates
Raja Mukherjee, Chief Marketing and Sales Officer, Golden Gate Properties
Praveen Jain, President, NAREDCO
Sahil Vora, Founder and MD, SILA
Other industry experts

Expert take on RERA

How will RERA change the real estate landscape?

Implementation challenges for RERA
Impact of RERA on commercial market
How will RERA help real estate at large?
What difference will RERA make to Indian real estate?
Impact of RERA on residential real estate market
RERAStrikes: Good times ahead for the real estate sector
Everything you ought to know about RERA
RERA implementation: Challenges and obligations
RERA to protect homebuyers interest and ensure timely project delivery
RERA Effect: Indian real estate awaits to inhale
RERA Act safeguarding homebuyers interest

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The Real Estate Act and Indian Realty
Dilemma over real estate regulatory bill
RERA to be successful after single-window clearance
RERA to limit new residential project launches
Importance of transparency in the sector
Real estate regulator to make the sector more systematic

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