For decades, the real estate sector in India has remained unregulated despite its exponential growth. At the transactional or operational level, this sector has been plagued with diverse legal regimes across states and opaque enforcement strategies by various State Governments. Although a significant contributor of gross domestic product, the real estate still suffers as the irregularities endemic in the real estate industry have resulted in deficit of trust amongst buyers as well as investors. As India moves ahead in its growth trajectory and becomes increasingly urbanised, the need to regulate and instil transparency in the real estate sector is more important than ever.
Prior to the advent of the Real Estate (Regulation and Development) Act, 2016 (“RERA”), real estate projects in India were regulated and sanctioned by various departments in the State Governments, as “land, rights in or over land, land improvements and colonization” are included in the State List of the Seventh Schedule of the Constitution of India. With the advent of RERA under discussion, the Ministry of Housing and Urban Poverty Alleviation, Government of India (“MHUPA”) in its press release dated June 5, 2013 clarified that RERA has been prepared in pursuance of the powers of Central Government under entries 6, 7 and 46 of the Concurrent List of Seventh Schedule in the Constitution of India, as RERA governs the contractual understanding between developers and buyers of units.
RERA was an initiative of the MHUPA to boost domestic and foreign investment in the real estate sector and provide ‘housing for all by the year 2022’. In the face of the operation of the promoters of real estate projects, becoming subject to a greater level of monitoring and regulation as per the provisions of the RERA, the proposed legislation met opposition at various stages. RERA received the assent of the President of India on March 25, 2016, was published in the Gazette for public information on March 26, 2016 to govern residential and commercial real estate projects. Certain parts of the Act came into force on May 1, 2016 and the remaining parts came into force on May 1, 2017, respectively.
Pursuant to RERA, it is hopes the likely integration of the regulation and investment in the real estate industry will provide an impetus towards development of real estate projects in India. At a consumer level, once the framework under RERA is in place in all states and becomes functional, the creditworthiness of this sector may see a positive shift in the long term.
RERA has been framed as a beneficial legislation with the objective of safeguarding the interest of buyers in real estate projects at every step of purchasing an apartment or unit in a real estate project. Some of the key safeguards are as under:
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