The implementation of Real Estate (Regulation and Development) Act, 2016 or RERA has offered hopes to homebuyers across the country, but a few factors still need to be fine-tuned to ensure protection of their rights.
The act provides for penal action against the developer for non-compliance and compensation to homebuyers in case of delay in delivery.
However, the mechanism for completion of stuck projects, if the developer is unable to do so, needs to be spelt out as possession of properties is the final relief for home-buyers, experts said.
More than 800 housing projects in the country are facing long delays of three to four years, with projects in Punjab and Haryana witnessing maximum delay of 44-48 months, a recent study showed.
Legal experts say RERA provides for homebuyer’s security towards quality and delivery at additional cost, as developers would pass on the cost of insurance, liability towards structural defects and risk of delivery to buyers. But, this too is for only for new and future projects after the implementation of RERA.
“For ongoing projects, the regulator should utilise the provisions of the act to facilitate closure of delayed, particularly cash-strapped projects or projects suffering due to delay in approval process, to provide relief to ultimate purchasers. Attempting to merely fine or imprison developers would not help the ultimate purchasers. Regulators should act as facilitators,” said Sudip Mullick, Partner, Khaitan & Co.
Over the last few months, several promoters of real estate companies including Unitech and Casa Grande were arrested for failing to handover possession of homes in their projects despite taking money. While these punitive actions are necessary as it will act as a deterrent against any such defaults in the future, it may not result in delivery.
Experts have been suggesting that apart from punitive action against developers, a solution needs to be devised to ensure homebuyers receive possession of their apartments.
“Although the act empowers homebuyers first right to complete such projects, they, in all probability, lack the core competence required for the activity. The government and the regulator should help facilitate the completion of the project by incentivising the activity for competent players,” said Samantak Das, chief economist and national director, Research, Knight Frank India.
Das said the roadmap for buyers stuck in delayed projects where developers are ready to face the strictest punishment of imprisonment is not clear. There have been instances of similar nature in the recent past and buyers are still stuck with incomplete projects.
“The issue needs serious discussion and a mechanism such as a distressed fund devised to avoid plight of homebuyers on this count,” said a government official on condition of anonymity.
A homebuyer’s pressure group, Fight For RERA, has already recommended that a committee be formed to come up with a Satyam Computer-like solution to provide reprieve to homebuyers whose life-time savings are stuck in unfinished projects.
“Of the projects that are already stuck, about 30% will be in cash deficit category or the builder is not serious about completing it. Finding a new developer to complete these projects can be a challenge. The government should identify such projects quickly and start investigation so that other assets of the company can be monetised to take these projects ahead,” said Abhay Upadhyay, National Convenor, Fight For RERA.