Note4students
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.
News
Context
- It is a year since the Real Estate (Regulation and Development) Act, 2016 (RERA) came into effect (May 1)
- A year after the real estate legislation came into effect, the follow-up in many States has been dismal
- 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
- 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
- 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
- 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
- Apart from Maharashtra, only Punjab and Madhya Pradesh have appointed a permanent regulatory authority (to be established within a period of a year)
- To ease the transition, RERA allows State governments to designate an existing body as the regulatory authority until a permanent one is established
- 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
- Additionally, only six States have set up the online portal contemplated by the Act
- 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
- 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) - 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)
- 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
- 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
- This date is also the deadline by when permanent regulators have to be formed and for the websites of all States to become functional
- 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