4 min read.Updated: 02 Dec 2019, 04:35 PM ISTRenu Yadav
Since industry bodies are largely seen as working in the interest of developers, there is trust deficit among other stakeholders
SROs will have no judicial powers over the developers
The Maharashtra Real Estate Regulatory Authority (MahaRera) has asked all developers who want to log their projects with it to register themselves with a real estate self-regulatory organisation (SRO) enrolled with the authority. The rule will be effective 1 December.
On the face of it, the move puts in another filter in place before homebuyers select a developer registered with Rera, but consumer and homebuyer activists say this would narrow down the options for buyers and kill competition by eliminating small developers. Also, since industry bodies are largely seen as working in the interest of developers, there is trust deficit among other stakeholders.
The regulator believes that having the SRO layer may bring down homebuyers’ grievances since the developers will be screened. We tell you how these SROs will work and whether they will indeed be able to reduce homebuyers’ grievances.
The plan for SROs
MahaRera has allowed industry bodies with at least 500 projects of member developers to register as SROs. Right now, two industry bodies—the National Real Estate Development Council (Naredco) and the Confederation of Real Estate Developers Association of India, Maharashtra Chamber of Housing Industry (Credai-MCHI)—have registered with MahaRera as SROs.
The SROs will be required to educate member developers about the regulations under Rera and ensure they abide by the rules. “There has to be further discipline that needs to be brought in as right now a stand-alone person can become a developer on the basis of approvals he has got from the planning authority and Rera registration later. But experience has shown that most of these stand-alone developers lack the professional ability to do quality job. The move will benefit homebuyers in the long run," said Gautam Chatterjee, chairperson, MahaRera.
However, the SROs will have no judicial powers over the developers. SROs will have the power to not register a developer with Rera if it doesn’t abide by the criteria regarding past track record and disclosures put in place by it, but it has no role to play for any future transgressions.
“No power is being delegated from MahaRera to any developer body. The authority to regulate, to penalize and to set right any person who has done wrong certainly rests only with the authority," said Chatterjee. Also, there is no clarity about what will happen if a registered developer doesn’t abide by the SRO rules.
Consumer activists and homebuyer groups feel that mere registration with SRO may not be enough.
Jehangir Gai, a Mumbai-based consumer activist, said, “Mere registration of a document cannot result in making a developer more responsible. The contents of the document is what matters and the mechanism to enforce the terms of the agreement would be relevant. So mere SRO registration will be of no use."
The Forum For People’s Collective Efforts, a consumer body, has raised questions in a letter to MahaRera: “How can MahaRera assume that promoters will abide by directions given by SROs? Does MahaRera consider SROs to be more effective and powerful than itself?"
So far, industry bodies, some of them now registered as SROs, have primarily raised developers’ concerns, which is why they are not inspiring confidence among buyers and activists.
To fill the gap, developers need to make efforts, said experts. Pankaj Kapoor, managing director, Liases Foras, a Mumbai-based real estate research firm, said, “If self regulation worked in real estate, we wouldn’t have been a mess like we are today. This looks like more of an administrative move."
Mudassir Zaidi, executive director, North, Knight Frank India, real estate consultancy, agreed. “It is the need of the hour to help fill the trust deficit in the minds of consumers and gain the trust of homebuyers," he said.
Industry bodies, however, claim they have already started making moves to win homebuyers’ trust. According to Niranjan Hiranandani, president, Naredco, as SROs, they will focus on homebuyers’ interests. “Our objective as an SRO as distinguished from judicial bodies such as Rera is that justice is done with homebuyers. The purpose of SROs will be to get an amicable settlement between the affected parties in case of a dispute," he added.
Some industry bodies are part of Rera’s reconciliation forums in Maharashtra and UP. These forums provide a platform to the homebuyers and developers to negotiate before going in for a formal court proceeding. Shanti Lal Kataria, vice-president, Credai Maharashtra (special zone), “For instance, in Pune, there are five benches and each bench has a senior member from Credai. The Pune benches have been operational since March 2018 and 147 cases have been resolved by it, while the success rate is 95%."
Under Rera, how SROs function may be different, said Anuj Puri, chairman, Anarock Property Consultants. “Developers now have much to lose by acting contrary to Rera. Such a self-governance mechanism can be very effective if accountability itself is not diluted," he said.
Self-regulation works well for all entities if followed in spirit. However, lack of clarity regarding the obligations of SROs and powers in case their members don’t abide by the regulation does raise questions about how effective they will be.
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