2 min read.Updated: 16 Nov 2021, 05:45 AM ISTRamesh Nair
Higher accountability will further lead to a favourable market for homebuyers
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Delays in home delivery, price escalations and lack of accountability are some concerns that homebuyers face in India. In 2016, the government enacted the Real Estate (Regulation and Development) Act (Rera) to bring in much-needed transparency in the sector. In the past five years of Rera, there have been some hits and misses. But the issue at the core remains—providing parity between homebuyers and developers. Prior to 2016, builder-buyer agreements were heavily tilted towards developers. A lot has changed since then with defined guidelines by the central Rera, but still, a lot needs to be done.
Typically, when a homebuyer makes a purchase, an agreement containing covenants related to the property is executed. This covers aspects like the payment schedule, size, amenities, timelines, etc. Prior to 2016, it was largely unstructured and non-standardized with limited clarity on aspects related to timelines, price escalation and changes in layout design. Post 2016, the central Rera brought in specific guidelines pertaining to these issues. This was intended to bring in accountability and greater transparency, thereby building buyer confidence in the market.
As of October, more than 77,000 cases have been disposed of by Rera across the country. Some states like UP, Haryana and Maharashtra have managed to implement Rera more effectively. Most states have set up a permanent regulatory authority. Some states have modified certain stipulations. Nearly 70,000 projects and 50,000 brokers have been registered under Rera. Let’s take a look at some examples that affect buyers.
a) A buyer’s payment cannot exceed 10% of the property’s value at the time of signing the builder-buyer agreement.
b) Revising property delivery schedules regularly due to construction delays. This is one of the biggest concerns for homebuyers. It leads to delays in home possession, with homebuyers facing cost escalations.
c) Central Rera provides that in case of any structural defect within five years of possession of the property, developers will be liable to rectify them. In case of default, the aggrieved allottees will be entitled to receive compensation. Some states have diluted this provision, and a few others are silent on this clause. This is significant and should be a non-negotiable clause for homebuyers.
Overall, the builder-buyer agreements need to be framed in sync with the guidelines of the central Rera. However, there should be some flexibility built in the agreements, depending on the location and local development rules.
A uniform builder-buyer agreement across India will lead to more confidence among homebuyers. Homebuyers will also have more faith in developers across the spectrum, and even in under-construction projects. But what more can be done?
a) Ease of usage of the Rera portal
b) Impart knowledge to homebuyers regarding Rera
c) Provide penalty parity between developers and homebuyers
d) Bridge the gap between Rera and the Insolvency and Bankruptcy Code
With homebuyers having a higher inclination to own homes, especially after covid, is it imperative that they trust the system. This can only come through if various facets, as mentioned above, and brought under a single umbrella. Over the past year and a half, home ownership has come to the forefront. Higher accountability will further lead to a favourable market for homebuyers, as they explore various facets to buy homes.
Ramesh Nair is chief executive officer, India, and managing director, market development- Asia, Colliers.
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