While the Real Estate (Regulation & Development) Act, 2016, includes provisions for ensuring timely and orderly delivery of projects, a simultaneous focus on initiatives to facilitate timely execution is also necessary to ensure faster and more effective implementation of the regulation, according to rating agency ICRA. “Though the Act has various provisions to reduce the malpractices in the sector and in particular address the issues faced both by the buyers and investors, it however does not seek much to facilitate and expedite the project execution,’’ ICRA has said.
Some of the prominent benefits likely to ensue from the regulation include elimination of fraudulent developers and agents, facilitation of informed decisions by the buyers, increased standardisation and improved accountability for timely execution as well as appropriate use of customer funds. In ICRA’s view, the recent consumer activism coupled with the pro-active stance by the judiciary is a positive step towards protecting the interest of buyers in the industry. Nevertheless, the implementation of the Real Estate (Regulation and Development) Act 2016 (RERaD Act or The Act or the Regulation) remains critical for restoring the buyers’ and investors’ confidence in the industry in the long run. Though not a one-stop solution, the RERaD Act, according to the agency, addresses a lot of issues plaguing the sector.
This is at a time when the residential real estate sector has been going through a prolonged slump with subdued demand on account of high real estate prices coupled with weak consumer sentiment and general economic uncertainty. Besides, supplyside constraints such as delays in receipt of approvals as well as paucity of manpower and working capital funds, has led to delays in project execution across micro-markets. The typical project execution cycle, which ranged between 3-4 years, has extended to as much as 6-7 years. Further, the real estate industry has historically been plagued by issues like lack of transparency and accountability
During the past few years, the extent of delays has increased significantly on the paucity of funds available with the developers as well as other above-mentioned issues. Given the inordinate delays in project delivery, lack of clarity regarding the final completion and limited bargaining power, increasing number of buyers are seeking legal intervention. In the current fiscal, the National Consumer Disputes Redressal Commission has come down heavily on prominent developers, including entities like DLF Limited, Parsvnath Developers, Supertech Limited, Jaypee Group and Unitech Limited, ordering them to compensate buyers for the delays faced in specific projects, according to ICRA. Other reasons for the legal proceeding against developers include changes in project design from the initial promised specifications with the buyers, construction without requisite approvals, fraud and cheating amongst others.