If you made a movie about the Real Estate sector in India you would have to name it “Dirty Picture”. One of the most lucrative industries in the economy, this sector has a star cast of colourful characters. Some of them connected to politics, but most of them “fixers” and “enforcers”.
The “dirty work” starts from the purchase of the land. “Fixers” identify the land and thereafter “Enforcers” move in where recalcitrant sellers have to be convinced to make the deal. Thereafter, a large dose of cash is the norm, now a little tempered by demonetization. Once the Builder takes possession, he then runs the gamut of governmental authorities to obtain the numerous licenses and approvals required to get the project off the ground. Generously greasing the wheel along the way.
Soon the prospective buyer comes enquiring. Sufficiently lured with glossy brochures and video presentations he strikes a “deal” for an apartment that carries with it the promise of a date of delivery. The Builder then asks the buyer for a slice of cash – “just so that you can save some taxes”, the buyer is told.
Thereafter the wait begins for the buyer. Deadlines come and go, and the Builder is already busy with his other new projects. An endless list of excuses is available for him – soil has some problem, shortage of sand, labour didn’t turn up, too much rain, too little rain, transport strike. Sometimes the buyer is lucky if the Builder does not slap him with some cost increases for the delay.
When the day finally dawns on the delivery of the apartment, the buyer’s woes are still not over. Poor construction, cheap fittings, lack of co-operation from the Builder to complete his documentation and last but most cruel – extra charges that were not included in the initial price.
In March 2016 the Parliament said it was putting a stop to this evil story.
Passing the Real Estate Regulation and Development Act 2016, an act that was cooked by the UPA and served by the NDA, the government instructed all states to formulate the rules and notify the regulator for their respective state.” To protect the interests of buyers and to impose penalty on errant builders” is the stated aim of the legislation.
As with all legislation in India, the objectives are noble. The Act aims to increase the transparency in the industry and to create a watchdog that will ensure compliance on the part of the Builders. A provision worth noting is the norm that builders must deposit 70% of the funds collected for a project in a separate escrow account. This is to ensure that the builder doesn’t collect advances on one project and thereafter go on a land buying spree elsewhere.
But will all this happen?
There are worrying indications that it won’t. Already the rules framed by several states have diluted many of the provisions in the original Act. Key among the dilutions is the bid to keep on-going projects out of the ambit of the bill. The hand of builder lobbies in the states is very apparent in this. After all they count politicians as friends or partners in many of their endeavors. Buyers who have been suffering delays and distortions in their contract with builders, and who had been waiting for RERA as a panacea for their woes, are no better off.
As the legislation unfolds across the states the other major question that the consumer is waiting with bated breath to find out the answer to is : Will the Regulatory Authority be their guardian angel, as envisaged by their lawmakers, or will it turn out to be another layer of corruption?