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6 Reasons Why RERA Is Of Little Use Today

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Many supporting laws and institutions real estate Act are missing—in effect rendering it useless to the homebuyers

Lakhs of prospective homebuyers and those who are stuck in under-construction projects were eagerly waiting for the real estate regulator to come into force. However, it seems that it will take more time for homebuyers to get relief under the Real Estate (Regulation and development) Act, 2016 (RERA). The Act was implemented last year on 1 May. It stipulated different deadlines to be met by governments of state and union territories (UTs). However, many states are behind schedule on various fronts. Let’s read more about the deadlines that have already lapsed or need to be met.

Notifying the rules

From the date of its implementation (1 May 2016), the Act required all state governments to notify their rules within 6 months, i.e., 31 October 2016. However, till 30 April 2017, only a few states had notified the rules. Central government was required to notify rules for the UTs. While 59 sections under the Act were notified on 26 April last year, the remaining 32 clauses were notified by the central government as late as on 19 April this year. “A slow-moving bureaucracy in the states may be one of the possible reasons behind the delay in notifying the Act by the states,” said Ramesh Nair, chief executive officer and country head, JLL India.

Establishing the authority

The Act stipulated that regulatory authorities had to be set up by 30 April 2017. However, till now, none of the state governments or UTs have established a permanent regulatory authority. The Act empowers the appropriate Government to designate any officer as an interim regulatory authority till a full-fledged regulatory authority is established. According to the Ministry of Housing and Urban Poverty Alleviation, as on 1 May 2017, 13 states and union territories have created interim regulatory authorities. These include Kerala, Maharashtra, Punjab, Rajasthan, Mizoram, Haryana, Delhi, Andaman and Nicobar Islands, and Chandigarh.

Many others are in advanced stages of finalizing it. These include Odisha, Bihar, Jharkhand, Assam, Tamil Nadu, Andhra Pradesh, Telangana, Tripura, Dadra and Nagar Haveli and Daman and Diu. Once completed, the final authority of Andaman and Nicobar Islands will align with that of Tamil Nadu.

However, some experts say that rules are being flouted in setting up interim regulatory authorities. Sachin Sandhir, global managing director, emerging business, RICS said, “Within the National Capital Territory of Delhi, the vice-chairman, Delhi Development Authority (DDA) is understood as being appointed as the interim regulator.” However, by definition, DDA is a developer or a promoter at best, and cannot be a regulatory authority under the Act, he added.

The appellate tribunal

The Act also mandates the states to establish a real estate appellate tribunal. The deadline for this was 30 April 2017. However, till now, it is not in place. The tribunal is important so that, in case homebuyers are not satisfied by the decision of an authority, they can approach the appellate tribunal and put in an appeal for a relief.

Registration of projects

The central Act requires developers to get all the ongoing projects, which have not received completion certificate (CC), registered with the regulatory authorities before 31 July. However, many states have diluted this section. For instance, state government of Uttar Pradesh and Rajasthan have excluded registration of ongoing projects where services have been handed over to the local authorities or to the residents’ welfare associations for maintenance. Or where sale or lease deeds of 60% of the apartments/plots have been executed. Or where application for completion certificate have been submitted. Similarly, Maharashtra requires a developer to register only the “phase of the project” for which occupancy or CC has not been received.

Registration of estate agents

Real estate agents are also required to get registered with the authority before 31 July. According to the Act, a ‘real estate agent’ is anyone who acts on behalf of one person in a transaction of plot, apartment or building and receives a remuneration as commission or otherwise, and includes property dealers, brokers, middlemen.

Web-based system

According to Act, within 1 year from the establishment of a regulatory authority, there needs to be a web-based online system for various purposes. It is one of the most prominent clauses of the Act. Once the regulator website starts functioning, homebuyers would be able to take informed decision before buying a property. They will be able to get authentic information on a range of issues related to: the project, its approvals, the developer, and the real estate agents. A few state like Maharashtra and Madhya Pradesh have setup these websites, but even here, all the required information is not available.

Consequences for the delay

While the governments are taking time to complete all the work that is required to comply with RERA, homebuyers are struggling due to delays in under-construction projects. Given the progress of regulatory authorities in various states, it seems that it could take at least 6 months to a year to get any concrete help or relief to a homebuyer from this Act.

Source: Livemint

Also Read:  The First Two Mumbai Builders to Register Under RERA Act

Regulations

373 Maharashtra Cities To Fall Under PMAY Scheme

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The state of Maharashtra has added 232 cities to the existing 142 which makes it 373 cities under the Pradhan Mantri Awas Yojana Scheme (PMAY).

The officials at the housing department feel that this step will aid the government take up more projects under the PMAY scheme.

Sachin Kulkarni, Builder shared his concerns over the lack of coordination between the department in executing PMAY projects. He said, “This is a good sign. However, the PMO’s seriousness in promoting HFA is diluted by the time it reaches the authorities. Apart from collecting application from interested beneficiaries, nothing has moved on the ground in urban centres. I hope that this initiative moves on fast track”.

Maharashtra CM Devendra Fadnavis recently states that the in order to create more housing stock the state’s Slum Rehabilitation Authority scheme be brought under PMAY so that it can receive the subsidy to create more affordable housing. He clearly mentioned that the government intends to create more housing stock and it was taking various initiatives and making policy changes for it.

Also Read- Affordable Housing To Get A Boost With PMAY’s Scope To Be Extended To Private Lands

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Real Estate Sector May Fall Under GST What Does It Mean For Buyers?

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One after the other the real estate sector has witnessed massive policy and law changes in its systems. Nonetheless, the tide has not passed yet. The GST council will take up a proposal to bring it under the uniform nationwide levy.

As the industry is still recovering from the RERA Act, the finance minister, Arun Jaitley said that there is a strong case to include real estate in the new indirect tax regime. He said this last week and also mentioned that GST Council will discuss it in November.

At present, the home buyers are paying 12 percent GST on under-construction properties. This percentage includes two taxes which are stamp duty and registration. The rate of which varies in each state but GST will make them uniform.

Santosh Dalvi, KPMG India partner (indirect tax) said, “If the entire real estate is brought under GST, they would have to abolish the stamp duty and we don’t know how the government plans to compensate the states for their loss.”

The stamp duty with registration and GST comes to approximately 18 percent for under construction properties. He further said, “So, it’s important to look at what rate it will be taxed at. We can then look at consumer prices”.

While agreeing, Bipin Sapra, EY partner (indirect tax), added, “It’s going to be a test for the government”.

Developers also pay taxes on raw materials. However, unlike other businesses, they don’t get any tax refunds through input credit. GST taxes every stage of the business activity to better compliance and compensates for it by permitting refunds.

Anuj Puri, Anarock Property Consultants chairman, said “By including real estate under GST, builders can get a fair amount of input credit, helping bring down costs,” He added that it would make homes cheaper for buyers.

According to Sapra, it will depend on the tax rate applicable.

Niranjan Hiranandani, co-founder of Hiranandani Group said, “Real estate under GST ambit means consumers will only have to pay one final tax.” He stated that with the commencement of RERA it brings transparency and GST would reduce the burden in terms of taxes payable while buying the home. He concluded, “Not only will this create positive sentiment but it should also boost actual sales”.

Also Read: Affordable Housing Is The Changing Face Of Indian Real Estate

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Regulations

Home Buyers Will Be Covered Against Builders Who Are Going Bankrupt

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In a move to protect home buyers from builders declaring their bankruptcy, the Insolvency & Bankruptcy Board of India (IBBI) has amended rules which make it necessary for any company to showcase how they have dealt with interests of all stakeholders. This is directed towards companies like Jaypee Infratech and some of the entities of Amrapali Group.

The regulator has informed about the revised rules last week. This will ensure that banks and other creditors do not get away by protecting their interests at the expense of others who are impacted by the action.  Banks are part of the creditors’ committee. They become an important decision-making body after a company is admitted for bankruptcy.

An expert bankruptcy lawyer said, “The change in the rules has plugged a gap as flat buyers are of the view that there is nothing to protect their interests.”

According to the new law that was enacted last year intends to speed up the resolution process in a period of 180 days, with a possible extension of 90 days. This will be done by appointing insolvency resolution professionals who will take charge of the company’s operations and prepare a plan. As per the law, an information memorandum will be finalized if the creditor’s committee is willing to take applications from other interested companies to take over the company.

The insolvency experts say that the law providing for the plan binds corporate debtor (the company) and its members, employees, guarantors, and creditors, other stakeholders involved in the resolution plan. However, there are no obligations mentioned in the rule to give any treatment to the stakeholders other than the financial creditors (banks) and operational creditors, which includes vendors and others who may have dues.

The National Company Law Tribunal, based on the comfort provided by the revised rules, will choose the final resolution plan based on bids that are received. The lawyer further said, “The tribunal will not clear the resolution plan without giving notice to all stakeholders and the flat buyers can raise objections at that point of time.”

Also Read: Tanvi Group Fail To Deliver Homes And Declare Bankruptcy

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