Six months ago, Uttar Pradesh Real Estate Regulatory Authority (RERA) appointed its first full-time chairman, Rajive Kumar, former chief secretary for the state government. Kumar talks about his experience so far, the progress on complaints, and how RERA could play a role in cases where buyers invoke the Insolvency and Bankruptcy Code against errant builders
How has your experience in Uttar Pradesh RERA been so far?
The experience has been very positive. This is a very revolutionary statute and has taken a long time to come into existence. This being a new organisation, there is both opportunity and challenge.
I was notified as the chairperson for Uttar Pradesh on 4 August 2018, and to the credit of everybody, we had a running court and offices within a month of the notification. By 4 September, both Greater Noida and Lucknow benches were holding their grievance redressal forums. For any organization to be up and running within a month is quite an achievement. Since then we have moved into many areas.
Noida has a higher number of aggrieved homebuyers and delayed projects compared to any other state? How challenging is that?
Just to put things into perspective, Maharashtra RERA had about 5,000 cases, Madhya Pradesh RERA had about half the number, and the number was much lower in other states, compared to about 12,500 cases in Uttar Pradesh. That is why the state government approved the setting up of another bench of RERA in the NCR—the Greater Noida bench. Almost 75% cases of the total cases in Uttar Pradesh are related to this area. NCR has a unique problem of its own particularly related to Noida, Greater Noida and Yamuna Expressway. We have already disposed off almost 5,700 cases. The Greater Noida bench (which started functioning on 3 April) will help increase the pace of disposal.
We have also started a conciliation process. We found that if there is mutually acceptable solution between the buyer and the builder, the follow-up and execution is simpler. So we are keen to further strengthen and streamline this process of conciliation. Until now, we have brought almost 300 complaints for conciliation. Whenever someone raises a complaint with RERA, he or she is first given the option of conciliation. In our experience, about 40% of the cases benefit through conciliation. For instance, a lot of people approach us and complain about project delay and ask for compensation. We have developed a standard operating procedure on the interest rate on delays. So now these are cases where both the parties can sit down together and say how much they are willing to pay, and a middle path can be found to settle these issues.
When conciliation does not work out, a formal complaint can be filed and taken forward. On the conciliation forum, there is a representative from the homebuyer association, the builder and a RERA officer called the conciliator. They hold meetings to find a solution. This process is picking up and results are rather positive.
Information asymmetries still exist on the state RERA website. For instance, information about cases against developers or projects are not available.
A window was originally (in 2017) given to promoters and developers to register their projects. At that stage, people were in a rush to get their projects registered. We have about 2,600 projects registered on our website.
As far as their screening and inspection are concerned, we have now taken that up in an organized manner. In terms of the kind of information you are looking for, we are hopeful that in the next three months, complete information will be available in cases where projects are ongoing.
RERA Act is also meant for the sector’s development. What are the development initiatives you have taken so far?
Actually, most of the development issues are compiled in Section 32 of the Real Estate (Regulation and Development) Act, 2016. And there is a substantial advisory role that RERA has been given under the Act to advise the government on various issues.
In the initial phase, we have undertaken two activities. One is taking up the exercise of grading various projects that has not been done on such a large scale. We are now in the process of getting the matrix right. So I expect to have the first list of such projects in the next six months. The second exercise is based on the complaints of developers that a lot of clearances are not coming through from different authorities. For this, we are planning to set up separate windows, depending on the authority concerned, where the government will be able to monitor various clearances on real-time basis.
You know, why is the cost of a unit is high? It is because if I can do that project in three years, it will have cost X, but if I am able to do the project in five years, the cost will obviously be X plus something. So eventually we have to look at finding ways to shorten the cycle. One part of that is to get clearances expeditiously. Once all the clearances are in place and if the cycle is cut down to six months from, say, 18 months, then I save one year of interest cost and project escalation. The benefit can then be passed on to the buyer.
Homebuyers are now also financial creditors under the Insolvency and Bankruptcy Code (IBC), and many of them are approaching the National Company Law Tribunal (NCLT) for resolution. Do you think that is right or should they come to RERA?
NCLT and IBC are revolutionary statutes. This has been a work in progress for a while and it’s good that it is now in the rule book. The real estate sector is in a way very unique compared to a factory or a normal company. In other sectors, by and large, projects are funded by financial institutions substantially. In the real estate sector, projects are substantially funded by either buyers’ own sources or through loans from financial institutions. Therefore, the decision to provide a certain status to homebuyers is a positive because they are substantial creditors.
Now our view in the authority here is that because both these statutes have been passed by the Parliament, when a matter comes to IBC or NCLT for consideration, they might consider taking views or recommendations from RERA while taking a decision. I think both statutes are important and need to coexist to see how homebuyers get their houses.