Real Estate Regulation & Development Act 2016 - Analyzing RERA; its impact & challenges on industry Video Lecture | Indian Economy for Government Exams (Hindi) - Bank Exams

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hello and welcome to study IQ in this
lecture we will discuss about a real
estate regulation and Development Act of
2016 why this act has become an
important current affair is because
recently the credit rating agency it has
come up with certain findings regarding
this act this act has brought in many
positive changes in the real estate
sector of the economy and that is why
this has become an important current
affair now so now after one year of its
implementation it is also necessary to
look at what has the impact which has
been caused by the implementation of
this act so in this lecture we will see
what are the impacts in the economy this
act has ghost and also we will discuss
about the challenges it faces and also
the way forward for this act but before
we move on to the current affair part
let us see what is a background where in
which this act was implemented and let
us also discuss about what are the
provisions of this particular act so let
us start real estate regulation and
Development Act 2016 so before the
implementation of this act we will see
that the real estate sector in India was
highly unorganized
so it was unorganized and it was also
underdeveloped so unorganized and
underdeveloped also we must note here
that the interest of the buyers or the
consumers of the real estate products
were also not protected so there was no
consumer protection properly implemented
so consumer protection was also less so
all this led to tensions and confusions
in this particular sector and the
government initiated this act if we look
at an overview this act aims at
regulating the real estate sector in the
country also you should remember that
this will include not only residential
but also commercial real estate so
commercial as well as residential real
estate is included under this act so
this act aims at improving the
transparency and accountability in the
real estate sector and increasing the
transparency and accountability will
the confidence of the buyers so when
buyers will have more confidence in this
sector the sector will grow there will
be increased demand in the real estate
sector so let us see what are the
provisions under this act provisions
let us see what is the applicability of
this act as we have already discussed
this act applies not only to residential
property but also to commercial real
estate so commercial and residential
real estate is included under this act
second one is the establishment of a
real estate regulatory authority so real
estate regulatory authority so under
this act there will be a real estate
regulatory authority in the centre as
well as in each states and union
territories so in the states and union
territories also there will be separate
regulatory authorities so what is a
function or purpose of this Authority
this Authority will oversee the real
estate transactions in that particular
state or in that Union Territory so real
estate transactions are overseen so this
Authority will act as an orderly agency
and this will coordinate the efforts of
the government as well as the various
stakeholders in the real estate sector
so the purpose will be to develop the
real estate sector in the economy and
also to provide the government with
necessary advice all recommendation
regarding the development of real estate
sector so this will act as a nodal
agency the third provision is with
regard to the registration so this deals
with the registration of real estate
projects as well as real estate agencies
so real estate projects and agencies so
let us see what are the criteria so in
case of real estate project this
registration is mandatory for all
project which exceeds an area of five
hundred square meters or a proposed more
than eight number of apartments so this
is mandatory for all the projects which
have a
area of more than 500 square meters and
also if the proposed building or real
estate is having more than eight number
of apartments so this is mandatory and
in case of agents if a particular agent
intends to sell any plot building or
apartment it is mandatory for the agent
to register with the authority the next
provision is with regard to the
mandatory disclosure of all the
information related to the project so
information regarding the project the
information regarding the project must
be compulsively given and who has to
disclose this video the promoters in the
context of real estate regulation and
Development Authority the term promoters
is very very important we will see it
later in this lecture itself what does
this promoter mean or who are included
in the term promoters so you should
remember that promoters are responsible
for disclosing the information regarding
project and it is compulsory under this
act now let us see what is the duties
and functions of the promoter under this
act
so promoter functions and duties the
first function of the promoter has we
discussed this to disclose all the
relevant information with regard to the
particular project so disclosure law so
disclosure of all relevant information
secondly there should be an adherence to
the project plan and proposals or it
means that whatever is the project plan
or whatever is the specification of the
project the promoter has to add her with
it again the promoter is also
responsible to rectify the structural
defects so structural defects must be
rectified and also it is a
responsibility of the promoter to refund
the money if there is any default so
refund if there is any default another
important provision of this act is a
compulsive a deposit of seven
percentage of the total funds so this is
a very important provision let us see
what it is so according to this
provision the promoter the promoter has
to deposit 70 percentage of the total
funds data collected from the a Latisse
a lot this means bias so how much error
amount has been realized from the elytis
out of that 70 percentage of this fund
must be kept in a escrow account this
escrow account should be maintained by a
scheduled bank and and an important
thing you should remember here is that
the promoter can use this money the 70
percent which has been kept in the
escrow account only for any purpose with
regard to the project so he cannot use
this 70 percentage fund for any other
purpose but only for the project or
construction of that particular project
so this is an important provision under
this act another provision is the
adherence to the declared plans so the
declared plans cannot be changed and
according to this Act if there is any
change in the declared plans a total of
2/3 of majority of the awardees has to
agree with the change so a 2/3 majority
is required in order to make any changes
in the declared plan or specifications
of this project we have seen water
rights and responsibilities of the
promoter now coming to the awardees or
to the buyers let us see what are the
rights and duties of the buyers or
awardees first of all the Elodie's can
obtain stage wise time schedule of the
project so stage wise time schedule this
means that at every stage of
construction the allottee has the right
to ask for time schedule again the
awardees have a right to claim the
position of the property as per the
declaration of the promoter so promoter
might have informed the allottee
at the beginning of the construction
that the project will be completed
within a particular period of time so
after the completion of that
LOD has every right to ask the promoter
for the position of that particular
property second writers with regard to
position third right this the alert II
can ask for refund along with interest
if there is any default from the side of
promoter so refund plus interest if
there is a default from the side of the
promoter another important provision of
this act is the fast-track dispute
settlement mechanism fast-track dispute
settlement mechanism so you should
remember here that earlier before the
implementation of this act the consumers
had to approach the consumers court in
case of any grievance so the provision
was to approach the consumer code but
now there is a fast-track dispute
settlement mechanism under this act it
means that the consumers can approach
the rara or the real estate regulation
authority in case if there is any
grievance for the consumers and if the
consumers are not satisfied with the
verdict of their era there is a option
for appeal
so in case of appeal the consumers can
approach the real estate Appellate
Tribunal here the real estate Appellate
Tribunal has the powers of a Civil Code
so if the consumers are not satisfied
with daraa
real estate regulatory authority within
60 days it has to approach them they
have to approach the real estate
Appellate Tribunal and and the Appellate
Tribunal is responsible to settle the
case within 60 days so there is no time
delay for the consumers and therefore it
is called a fast-track mechanism of
dispute settlement the next provision is
with regard to the carpet area so under
this act a clear-cut definition of the
carpet area is given so since the
definition of the carpet area is given
the developers can sell only the carpet
area which means the net
usable space of that particular
apartment so net usable space is the
carpet area and only this can be solved
so with this the consumers will get a
clear idea of how much space they have
for utility another provision under this
act is with regard to the penet of
provisions so this includes analogies in
case of any default or in case of any
contravention to the provisions of the
Act
all the orders of the authority or the
tribunal so these are the provisions
under the Act so now let us see what are
the benefits of this Act first of all it
brings a common platform common platform
for the buyers sellers and
intermediaries who are engaged in this
sector so first of all a common platform
the next one is a single regulator so
under this the whole real estate sector
is brought under a single regulator and
also this Act provides for proper
grievance settlement mechanism again
another benefit is with regard to them
accountability it brings so we have seen
that the developers has to provide to
the buyers the project details lay out
plans timelines etc this will bring in
an accountability and if there is any
mismatch or default in any of this the
developers will have to provide for
compensation so this will bring
accountability again we have seen that
the seventy percentage of the funds are
realized from the buyers should be kept
in an escrow account and this has to be
used only for the construction of the
project so this means that the diversion
of the funds can be eliminated so
diversion how funds is not possible
again this brings transparency how
because the all the project details has
to be disclosed so this will bring
transparency in the real estate sector
also there is a FasTrak dispute
settlement mechanism so dispute
settlement mechanism
it means the consumers are now more
confident they are they are willing to
invest in the real estate sector which
will increase the demand for the real
estate sector also there are
concerns with regard to this act so let
us see what are the concerns first of
all there is a difference between the
center and the state loss so in the
center there is a different lobe and in
the state's the states might have
diluted or sometimes adopted a different
version another concern is with regard
to the definition of the promoter we
have already said that we will discuss
about the term promoter in this act and
it is very very important so under this
act promoter means anybody who is
actively involved in the project so any
active member in the project comes under
the purview of promoter so this includes
not only the developer sometimes a land
owner the strategic investors equity
shareholders etc so all of them will
come under the term promoter another
concern is with regard to clearances so
sometimes there can be delay in
clearances so it needs clearances from
sometimes from the Union level sometimes
from the state level and sometimes also
from the local authorities so clearances
may take time and according to this act
if the developer makes any kind of
default the consumers can get refund
plus interest so what happens sometimes
it may not be the fault of the promoter
or the developer it can be because of
some clearances delay but who has to
bear the cost of it the promoter or the
developer so this will put the developer
into some kind of risk so that is also
one constraint so in the beginning of
our discussion we said that this has
become an important current affair
because I see AR has come up with
certain findings so that is the most
important thing in this session and we
are moving on to the current affair part
so let us see so let us quickly see what
was the background at which this act was
enacted as we already said the real
estate sector was highly unorganized
and also fragmented what were the
problems in the real estate sector
earlier before them enactment of this
particular act the most important
problem with the real estate sector was
that there was delay in completion as
well as possession of the cross
so delivers the main problem in
completion and position also the Builder
buyer agreement always favored the
Builder so the agreement when favorable
for builder another drawback was the
prevalence of cash transactions so the
property transactions were mainly mailed
in the form of cash so all this had led
to the losing of confidence of the bias
so buyers lost the confidence again the
prices were also elevated so elevated
prices has led to a decrease in demand
we have already seen when the price is
high the demand will come down so this
principle applies here also earlier
because of elevated prices the demand of
the real estate sector are also down so
on the backdrop of all these factors
this act was enacted and now let us see
what is the impact this act has made on
the Indian economy what are the impact
of real estate regulation and
Development Act the most important
positive impact was in relation to the
terms of completion of the project or
position of the project the completions
are deliveries became proper or on time
so delivery or completion of the project
so in order to find the improvement in
the delivery or in the completion of the
project 11 sample builders so these 11
sample developers has projects all over
India and according to the study there
was 30 point 0 2 million square feet
completions in the year 2015 so in the
year 2015 it was 30 point-0 2 million
square feet project completions in India
and when it comes to 2017 that is after
implementation of this act the study
says that the project completions has
increased you 45.5 1 million square feet
it is in the year 2017 so according to
the study the completion has
increased or the project deliveries has
increased and also these are within the
timeframe secondly an important impact
is that Rara addresses the Builder buyer
agreement issues the Builder buyer
agreement issue so under this act it
prescribes a model agreement model
agreement so here you should remember
that this model agreement is brought out
by States so different states will have
different model agreements and what is
the purpose of this model agreement the
model agreement aims at bringing the
Builder and buyer to a equal platform we
already said that one of the major
concerns with regard to this act was
that we already saw that before the
implementation of this act the
agreements were favorable to the Builder
so now with this model agreement it
tries to make a equilateral to create an
equal platform for both the Builder as
well as for the buyer and this model
agreement also aims at building a sense
of responsibility from the part of all
the stakeholders another impact of this
act in the economy is that it has
brought out transparency and
accountability in the real estate sector
we have already seen how this act has
brought in transparency and
accountability so all this has increased
the confidence of the buyers and this
has resulted in increase in the sales of
real estate so increase in sales with
regard to value as well as volume value
and volume of sales in the real estate
sector has gone up some challenges which
this act faces first of all the penal
provisions in the act we have seen there
will be penalties in case of default or
for non-compliance with that so the
penal provisions in the act has brought
in a fear in the minds of developers and
their challenges with regard to
understaffing understaffing here means
that in order to implement this act
properly her certain said a certain
amount of human resources should be
dedicated for this so there is
understaffed
for that reason the act is not able to
be completely implemented or made its
full advantage another challenge is the
absence of draft sale agreement format
so there is no draft sale agreement form
at all so because of all these
regulations the real estate sector the
developers in the real estate sector are
making some delay launches they are not
easily launching new projects so because
of all these regulations the launching
has also become a issue so what happens
when there is less launches the supply
will be less so supply less than the
demand and this will lead to increased
prices again another challenges with
regard to States almost 20 states have
interim or final Herrera Authority and
each stage has some different diluted or
some different versions of this act
another challenges with regard to the
escrow account
where in which seventy percentage of the
total realization has to be logged in
for construction purposes so what
happened earlier was that the developers
used the money which was realized from
interim sales so the developers used the
money realized from the interim see
interim sales for funding projects so
now they have to keep it with the escrow
account way forward or solutions to
overcome this challenges let us see what
are the solutions and if you are writing
a descriptive answer you should remember
that the impact of this act on the
economy is very very important and they
will also ask you regarding the
challenges impact challenges and wave
for these three things are very very
important there are less chances that
the question will come with regard to
the provisions in the Act
sometimes they can ask you but more is
the chances to ask for the impact
because in exams especially like you
busy exams the question the question
would be to analyze the impact of this
act in the economy and to suggest
measures to overcome the
challenges so these three things is very
important you should have an
understanding it doesn't mean that you
have to buy hide what does impact or Oh
or what are the challenges on what is a
way forward no you have to understand
what is the issue what has happened or
what is the impact of the issue and also
you should be able to suggest some
measures to improve the act now let us
see way forward or solutions the first
important step would be to align the
state rara with the central rules so
state and center should have a
uniformity so the uniformity will bring
in lesser confusions
this will bring not only uniformity but
also transparency and also there will be
a structure all over the country so the
analysis also becomes easy here you
should also note that suppose a
particular bader or developer example
say for example builder a b c if this
particular builder has projects all over
india suppose he has projects in ten
states ten states might have ten
different rules of rarer so it becomes
difficult for the Builder that is for
the ABC to implement projects or to
launch new projects so if all our
endeavor is her uniform set of rules it
becomes easy for a developer to launch
projects all over india we have seen one
major challenges with regard to stuff or
under stuffing so this problem also
needs to be rectified another suggestion
of ICRA is that the state should try to
create an environment and infrastructure
which will create ease of doing real
estate business so infrastructure and
structural ease should be there for real
estate sector so that they can easily do
the business so what is the impact of
easing the business environment for them
then this will increase the demand when
when doing business in the real estate
sector becomes easy the developers will
be able to bring in more projects and
this will increase the demand of
consumers so the developers becomes more
efficient the cost will come down
because of the ease of doing business so
they will be able to sell their projects
at lesser cost and within the time gap
so this will boost the demand in the
economy of the real estate products and
what will happen when the demand
increases this will lead to more number
of employment in the economy there will
be more employment generation more
people will be employed in the real
estate sector construction etc and this
will lead to growth of the economy in
terms of GDP also you should remember
that some major sectors that support the
real estate sector belong to the core
industries so some core industries like
the steel cement etc highly support the
real estate sector so these core
industries will also develop with the
development in the real estate sector
the ICRA
also suggests that there should be
administrative efficiency and political
willingness in order to promote the
growth in the real estate sector
political willingness and administrative
efficiency so these are the suggestions
put forward by the ICRA
in order to develop the real estate
sector
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