Still, assuming that it WILL be passed sooner or later, there are pertinent questions being asked about how much more 'consumer friendly' it has become in its latest avatar.
One of the changes to the previous draft of RERA that caught my eye first was that the minimum balance that a developer must maintain in the escrow account of his project was lowered to 50 per cent from the earlier suggestion of 70 per cent. Before this Act, there was no stipulation of creating an escrow account for a real estate project and holding funds in it for that particular project.
Developers were free to siphon off funds to buy more land or start construction of a different project. As of today, RERA makes it mandatory to keep 50 per cent of funds locked for construction of a particular project. This is a big positive for consumers. As of the latest directives, this amount collected from buyers must now be put into the escrow amount within 15 days.
However, developers can effectively still divert 50 per cent of the funds that they collect from buyers of a certain project into land acquisition or other projects. This in fact encourages them to build land banks and show more projects on their portfolios and balance sheets, which always works well when it comes to raising more debt or private equity funding.
Another notable revision in the latest draft of the RERA is that it now includes commercial projects under its purview as well. This is undoubtedly good news, because investors of office real estate will also be offered protection under the purview of this Bill. This is imperative and a relevant need. Though it is a fact that 85 per cent of the market is residential, the Indian real estate sector needs to move towards greater transparency at all levels, not in pockets.
Interestingly, RERA's scope has now been expanded to include brokers and agents as well. In other words, such individuals and agencies are now subject to punitive measures if they do not comply with the authority's and tribunal rulings.
Among the latest amendments to RERA, all under-construction projects will have to be mandatorily registered within three months of setting up of the regulator once the Bill is fully deployed as a law. Failure to register a project within the stipulated time frame is liable to attract a penalty of 10 per cent of the overall project cost and an additional penalty of 10 per cent and/or a three-year prison term if the developer continues to drag his feet on registering his project.
Also, the developer will no longer be able to make arbitrary changes to original plans or the structural design. In fact, no such changes will be permitted if the developer has not been able to obtain the sign-off on proposed changes from at least two-thirds of the buyers into that particular project.
The latest draft has also paid heed to an important issue that was neglected in the previous versions - namely that of grievance redressal. It no longer tries to position itself as the only go-to authority when it comes to customer grievances, and confirms that customers with grievances can also approach consumer courts with their problems. This makes sense, because positioning itself as the only go-to authority in such cases would have resulted in a huge logjam of pending complaints to be heard and addressed.
Finally, even projects for which completion certificates have not yet been obtained will now also be covered under the RERA's umbrella, which means that a larger base of customers is now included under its protection.
All in all, the only constant on the RERA front has been change, and it is now high time that it be kicked into real gear. There will be no point in time when the government will not face any more resistance to this very important piece of legislation, so the need to evolve consensus is of utmost importance to enable passage of the Bill into law.
The author is Chairman & Country Head, JLL India