India’s main focus is on affordable housing. Housing is a critical need, as population growth has been driven by rapid urbanization. The 2016. A new commitment to transparency, accountability for costs paid, and efficiency is among the key issues addressed by the Real Estate (Regulation and Development) Act. In addition to its provisions and challenges, RERA will be examined in relation to how it can help people live at affordable housing – including its role in making it accessible to everyone.
Background of RERA
In order to safeguard the interests of homebuyers and regulate investment in real estate, the Real Estate (Regulation and Development) Act, 2016 was introduced. In the lead-up to RERA, the Indian real estate market was plagued by issues such as project delays, corruption,
and lack of transparency. This was in contrast to earlier initiatives. RERA aims to eliminate weaknesses by introducing a regulation that registers real estate projects and agents, ensures project completion in shortest time, and imposes severe penalties for non-compliance.
Defining Affordable Housing
Accessible accommodation material is made available to economically weaker sections (EWS), low-income groups (LIG), and middle-class groups through affordable housing. The affordability of housing can be influenced by various factors, including the size or scope of the building. Through social cohesion schemes, Pradhan Mantri Awas Yojana (PMAY) provides an affordable housing program for the poor that is classified as “underground” and middle-income”. The carpet area for middle income groups should not exceed 60 square meters, while their areas are restricted to 200 square metres.
Key Provisions of RERA that Pertain to Affordable Housing:
1. Mandatory Registration (Section 3): RERA mandates the registration of all real estate projects with a regulatory authority if the land exceeds 500 square meters or involves more than eight apartments. This requirement ensures that affordable housing projects are also subject to scrutiny, ensuring transparency.
2. Carpet Area (Section 2(k)): One of the more important contributions of RERA is the introduction of a standardized carpet-area, which accompanies the disappearance of earlier confusion and ambiguity such reports gave to the final buyer, say, for example, in the affordable housing segment.
3. Escrow Mechanism (Section 4(2)(l)(D)): The developer is supposed to deposit 70 percent of the funds collected for the project after receipt from a buyer into an escrow account. Such monies can then be utilized but only for purposes related to land and construction, which in effect is expected to add financial discipline and complete the project in time.
4. Timely Delivery of Projects (Section 8 and Section 18): The developers will be penalized in these cases where they end up creating a nuisance for the buyer who has to be left gasping in thin air. This deliberate attempt could be most acute for the affordable housing bunch.
5. Grievance Redressal Mechanism (Sections 20-40): Since the RERA establishes Real Estate Regulatory Authorities and Appellate Tribunals, resolutions of disputes between builders and buyers may be carried out smoothly thus giving relief to the buyers of affordable housing, who can bring their concerns vividly to the government.
6. Transparency in Advertisements (Section 12): Developers who drive the project are prohibited from expanding advertising messages or deceiving consumers. The stricter conditions within the RERA require developers to convey whole disclosure of the project right from the approvals down to the exact nature and the process through which the consumer could make use of RERA’s communication channels.
Effects of RERA on Affordable Housing
1. Increased Buyer Confidence: Buyers' confidence has been boosted by the increased transparency and accountability measures implemented by RERA. The rules are stricter. For those purchasing affordable housing for the first time, it’s a valuable added bonus that their investment is well-protected.
2. Timely Project Completion: Timeliness and penalties for delays have been enforced, allowing developers to meet timelines more quickly. Affordable housing projects may suffer from delays, making this crucial for their success.
3. Better Financing Opportunities: Financial institutions are more likely to approve loans for RERA-registered projects, as the risks involved are not as high. Consequently, affordable housing developers have had greater access to credit for potential buyers.
4. Standardization and Clarity: Buyers have been able to make informed decisions since a standardized definition of carpet area and mandatory disclosure of project details were introduced.
Challenges and Limitations
Despite its benefits, RERA encounters some challenges:
1. Disparities may arise when the different rules and regulations for RERA are implemented separately at the state level, causing confusion in other areas. However, some states have diluted provisions that weakens the act.
2. Only projects that exceed a specific level of area, such as 500 square meters or eight apartments, are eligible for RERA coverage. Smaller projects may also meet affordable housing needs.
3. RERA’s lack of staff and infrastructure has caused delays in settling complaints, leading to slow resolution.
4. RERA rights are not known to many buyers of affordable housing, particularly in rural and semi-urban areas. It reduces the scope and impact of the act.
5. Many smaller developers contribute significantly to the provision of affordable housing, but due to their limited financial and technical resources they are often unable to meet RERA’s strict standards as such.
Affordable Housing and Government Initiatives
Government has introduced several measures to support RERA’s efforts in promoting affordable housing:
1. Through the Credit Linked Subsidy Scheme (CLSS), PMAY intends to provide “Housing for All” by 2022 through the establishment of affordable housing units and interest subsidies.
2. Affordable housing has been granted infrastructure status, which has enabled developers to obtain loans at lower interest rates and tax benefits.
3. Government-sponsored PPP models are utilized to enhance the affordable housing supply by incorporating the private sector's input.
4. Section 80-IBA of the Income Tax Act grants developers tax exemptions for affordable housing projects, which incentivizes construction in this sector.
Way Forward
One way to further enhance RERA’s impact on affordable housing is by implementing the following actions:
1. To increase effectiveness and level of playing field, RERA must be implemented uniformly across all states.
2. Educating buyers about their rights and benefits of RERA through awareness campaigns can increase accessibility.
3. Improved capacity building can enhance the efficiency and speed up of dispute resolution among regulatory authorities and tribunals.
4. Offering financial and technical support to smaller developers can promote compliance and increase the supply of affordable housing, which is a positive outcome.
5. Using technology to monitor a project, register it, and resolve grievances can improve process efficiency while reducing delays.
Conclusion
The real estate industry has been completely transformed by RERA, which now promotes transparency and accountability. Why is this? Affordable housing is greatly aided by its ability to provide buyers with security and ensure the projects are completed on schedule. To fully exploit its potential, it must confront issues such as state-level inconsistencies, lack of awareness, and compliance difficulties. RERA can assist in achieving the “Housing for All” vision by working together with government initiatives and focused reforms.
This article is authored by Vimansha Nawalgaria, who was among the Top 40 performer in the Cyber & Technology Laws Quiz Competition organized by Lets Learn Law.