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Navigating the RERA Act, 2016: Demystifying the Basics

Indian real estate sector is governed by a mix of central legislations and state-specific regulations. The Indian Constitution's concept of "land" provides the basis for this system. According to Article 246, "land" is one of the subjects covered by List 2 or the State List of the Seventh Schedule, which prescribes the legislative subjects, the states are permitted to regulate.

Apart from this, List 3 of the Seventh Schedule to the Indian Constitution, also known as the Concurrent List, contains subjects that are governed by both federal and state legislation, including "Transfer of property other than agricultural land, registration of documents and deeds", "Contracts other than for agricultural land", and related terms. Real estate in India is subject to a variety of regulations since properties are intimately tied to issues regarding the land. Since 2012, the Indian real estate market has been in decline.

This is a result due to interplay of different variables like unemployment, a build-up of inventory, the recession, a poor rental yield, murky taxes, and arbitration. As a fallout of this, the returns or yields in the real estate sector have not increased as expected. If we compare relatively, there is now less demand for real estate. The recovery of builders' investments has slowed significantly as a result of the decreased demand. Lack of transparency is the sector's main problem.

The system was opaque in terms of cost, construction delay, building quality, ownership, and legal disputes. The largest problem among these is the delay in giving buyers their home. The number of properties under development reached an all-time high over the past 20 years.

Real Estate (Regulation and Development) Act, 2016:

  1. Introduction
    The Real Estate (Regulatory and Development) Act of 2016 (often referred to as the RERA Act) was passed on 26 March 2016 and went into effect on 1 May of that same year. As there was no specific law governing the Indian real estate sector prior to this, it is regarded as one of the key pieces of legislation. The issues of purchasing, selling, and registering land property are covered by real estate laws.

    A foreigner may invest in India's real estate market using the Automatic route under the country's FDI policy, which implies that neither the Reserve Bank of India nor the Indian government must provide their consent. However, it is important to remember that such investments must adhere to the FDI policy. In India, land is divided into a number of types, including residential, commercial, and industrial areas.

    Whether or not the land is situated in a residential area, the owner of a land in India is obligated to pay specific taxes in line with the State legislation. By using contractual provisions, the landowners do their best to transfer some of their duty to the party that is renting the property, but the owner of the real estate is still ultimately responsible.
  2. Macro-Economic Impact
    The adoption of the Goods and Services Tax in conjunction with the RERA initiative is seen favourably for the industry. Transparency and accountability were the fundamental problems in Indian real estate sector, which have since been resolved. RERA has had such an impact that when the website was first introduced in the state of Uttar Pradesh, 15000 complaints were sent from the Noida region alone in a single day. RERA, however, has had an unsatisfactory reception in several jurisdictions. In Haryana, purchasers have expressed dissatisfaction over the fact that RERA does not apply to them if they have already moved into the house.
As a result, they are unable to protest about the builder's lack of services or facilities. RERA has not yet been fully affected since each state is preparing its independent legislation and standardized measures to deal with issues related to the subject of land.

Provisions for Resource Sharing:

As a "quasi federal" country, it could be challenging to execute an act like RERA in a fair and efficient manner all at once. Also, a bigger number of real estate purchases is projected in the more developed states, like Maharashtra, Tamil Nadu, Gujarat, Kerala, Karnataka, and Telangana, to mention a few.

Would the financial advantages from these progressive states be fairly distributed to help other "less-developed" states in the sake of a shared national aim of economic development? If not, how may India's strategic interests be affected by a pattern of migration from less progressive to more progressive states? These are some aspects where more clarity is needed.

Qualification of Real Estate Agents:

RERA puts in a mandate for real estate agents to register, but the Act falls short of making mention in regard to compulsory certification of real estate agents'. Real estate agents in OECD nations, even in small countries like Singapore, go through rigorous training and public testing (which include professional ethics, disclosure, and the mechanics of real estate laws).

For example, in the United States, both real estate brokers and salespeople must pass a two-tiered test. Before receiving licences to practise and advertise real estate in their state, all parties involved must first pass the state-organized test. Moreover, breaking this rule might result in your licence being suspended.

Setting global-centric standards for real estate agents and creating a top-tier talent pool for enablers is sensible and important as India opens its economy to the rest of the globe. Although while real estate agents are currently required to be registered, this does not vouch for their fundamental ability to manage the complexity of real estate transactions.

A group of inexperienced salespeople and agents poses a significant danger to domestic and foreign buyers and investors. Furthermore, it is considered biased and against the interests of the purchasers when developers (their principals) urge that projects be sold off-the-plan and completed as quickly as possible in order to make quick sales commissions and "push" projects.

This new Real Estate (Regulation and Development) Act, 2016 legislation is unquestionably a step in the right direction and is thought to do away with the persistent problems of project delivery delays, consumer exploitation, a lack of accountability, arbitrary procedures, and EMIs.

Although the Real Estate Regulatory Act (RERA) is a Central Act, each State has its own version that attracts and encourages investment in the real estate sector by re-establishing consumer confidence, safeguarding buyer interests, and establishing the Real Estate Regulatory Authority and Appellate Tribunal. As a result, there will be fewer lawsuits because of the strict rules and regulations in this industry.

Consequently, the most important objective with the implementation of RERA was to successfully create the Real Estate Regulatory Authority in all the states within the specified timeframe, which regrettably has not been accomplished by this point in most of the states. So, in order to achieve the goals of RERA, it is important for all states to create these regulatory authorities.

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