What is holding back the real estate Act?

It seems that anything related to real estate in India struggles to adhere to deadlines. The Real Estate (Regulation and Development) Act (RERA), 2016, was proposed in 2009. When it was promulgated by Parliament in May 2016, it was hailed as game changer—with its emphasis on transparency and consumer protection. Even after being implemented by the Centre, it is still on the verge of missing the first of its deadlines. As per the Act, state governments are supposed to put in place all rules and regulations for their respective states by 31 October but that looks unlikely to happen.

As land is a state subject according to the Constitution, even after the central government enacts the required rules and regulations, more time is needed by the state governments to implement the Act. And even after it is fully implemented, it could take some time before there is any visible change on the ground.

But any change can only be initiated if the deadlines stipulated in the Act are met. Here’s a look at these deadlines and their status vis-a-vis their deadlines.

The real estate Act was passed by Rajya Sabha and Lok Sabha in March 2016. And by April 2016, the Ministry of Housing and Urban Poverty Alleviation (MHUPA) had announced that it would commence from 1 May 2016, and notified 69 of the total 92 sections of the Act.

However, as land a state subject, therefore, all the states need to have the mechanism in place to operationalise the Act. Towards this end, the Act has stipulated certain deadlines that all states are supposed to adhere to (see table). The first of these deadlines ends on 31 October. By this date, all states should have in place the rules for carrying out the provisions of this Act.

There are other deadlines for when the regulatory authorities and appellate tribunals are to be set up and by when the rules and regulations regarding these agencies have to be in place.

Given that multiple deadlines are linked to each other, missing one deadline may have a domino effect on the implementation of the Act.

Each state government has to set up its own regulator, and the central government has to do it for the union territories. The central government is on track with this one. On 24 June, MHUPA came out with the rules and regulation for Chandigarh, Andaman and Nicobar Islands, Daman and Diu, Dadra and Nagar Haveli, and Lakshadweep. However, only a few state governments have released the draft guidelines so far. “In Maharashtra, the draft rules have been prepared and after seeking opinion of the public, it is expected to be notified by the end of the month,” said Aradhana Bhansali, partner, Rajani Associates, a Mumbai-based law firm.

A Hindustan Times report on 6 October quoted Navneet Sehgal, principal secretary of the information department, Uttar Pradesh (UP): “to safeguard property buyers’ interests, the UP (Uttar Pradesh) government wants the real estate regulatory authority in the state to function as soon as possible. It is likely to be formed by next month (November).” However, based on the current status, “it looks highly unlikely that state governments will be able to meet the deadlines,” said Anuj Puri, chairman and country head, JLL India. “This time it looks unlikely—but in the longer term, within the legally defined limit, it will probably get done,” said Sachin Sandhir, global managing director, emerging business, RICS— a real estate accreditation body.

Different states have different reasons for delays. One reason is that a few states already have a regulator for real estate. “There is also a case of overlapping of powers and functions of the regulator, the recommendation committees, and the appellate authority,” said Bhansali. A few states, such as Maharashtra, already have local laws in place for regulating the sector. In such cases, there could be an overlapping of jurisdictions between the older and newer statutes. Integration of the state authorities with the central authority will also take time, she added.

Other reasons for delay could be that states may need clarity on some aspects of RERA; or some local factors may be making the implementation of the Act a little difficult. One such issue could be the process of approving projects and the definition of under-construction projects. “The issues related to covering the under-construction properties, delays in getting approvals by developers and reasons of delay that are beyond the control of developer are not clearly covered by the Act,” said Sudip Mullick, partner-real estate practice, Khaitan & Co., a law firm.

In case the state government is not able to meet the deadlines, “the central government may...extend the timelines on case to case basis,” said Bhansali. However, state government will be accountable in case of any delay. “If a state government fails to constitute the authority by 1 May 2017, it could technically be held accountable and answerable as a party in litigation between a buyer and a developer,” said Sandhir. Whether the central government needs to extend the deadline or not, we should know soon.