Real Estate Industry

[op-ed snap] The RERA report card


Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspectives, the following things are important

Prelims Level: Particulars of the RERA

Mains Level: The issues related to bad implementation of RERA rules in different states.



  1. It is a year since the Real Estate (Regulation and Development) Act, 2016 (RERA) came into effect (May 1)
  2. A year after the real estate legislation came into effect, the follow-up in many States has been dismal
  3. There is still a long way to go before the real estate sector operates in an “efficient and transparent manner and protect the interest of consumers”

Implementation of the Act: Issues
Dilution of the RERA rules

  1. Only 20 of the 28 States (the Act is not applicable in Jammu and Kashmir) have framed the rules stipulated under RERA to carry out its legal mandate
  2. In some States such as Uttar Pradesh, the Act’s provisions have been watered down in favour of builders by altering the definition of “on-going projects” which need registration under RERA
  3. There is also a dilution on the penalties for non-compliance

The speedy dispute redress mechanism envisaged by the Act is yet to take shape

  1. Apart from Maharashtra, only Punjab and Madhya Pradesh have appointed a permanent regulatory authority (to be established within a period of a year)
  2. To ease the transition, RERA allows State governments to designate an existing body as the regulatory authority until a permanent one is established
  3. This has resulted in 13 States working with only a designated regulatory authority. West Bengal is yet to even designate a regulatory authority

Other issues

  1. Additionally, only six States have set up the online portal contemplated by the Act
  2. In the Northeastern States, RERA has been challenged on certain constitutional grounds — of land belonging to the community and autonomous councils

Conflict between the IBC and the RERA

  1. One of the most notable provisions of the RERA is the requirement to keep 70% of funds received for a project in a separate escrow account
    (a step to prevent a diversion of funds which usually happens and in turn results in project delays)
  2. Perhaps because of this stipulation and the overall ill-health of the real estate sector, many developers are now facing insolvency proceedings under the new Insolvency and Bankruptcy Code (IBC)
  3. There appears to be a potential conflict developing between the IBC and RERA which needs to be checked as it would be against consumer interests

Government is taking the cognizance of the issue

  1. Recently, the Central government notified June 30 as the date by which all States have to do away with dilutions and bring in all incomplete projects within the ambit of RERA
  2. This date is also the deadline by when permanent regulators have to be formed and for the websites of all States to become functional
  3. One hopes that in due course, developers will recognise that they can no longer operate with impunity by arbitrarily escalating costs of construction or missing timelines without being held responsible
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