5 things that will make developers RERA-ready
To bridge the gap between the government, developers and consumers, Magicbricks organised an event ‘Real Estate – The RERA and GST Era’ in New Delhi on June 29, 2017
The Real Estate (Regulation and Development) Act, 2016 (RERA), has given India’s real estate sector a new direction but there are some teething problems being faced by developers.
To bridge the gap between the government, developers and consumers, Magicbricks organised an event ‘Real Estate – The RERA and GST Era’ in New Delhi on June 29, 2017.
With only Madhya Pradesh and Maharashtra ready for RERA on Day 1, experts at the event deliberated on a host of issues that matter to the consumers and developers. Magicbricks lists 5 key takeaways from the event for developers.
Madhya Pradesh RERA regulator, Antony De Sa, says even those states which are ready, developers are not ready. “For a large number of developers it meant filling forms, which are lengthy and cumbersome. Developers will have to redesign their allotment letters, sales deeds, brochures, advertisements and their cash-flow management to become RERA-ready.” Haryana RERA Executive director, Dilbag Singh Sihag, says that even though the state has not officially notified rules, developers are being registered after submitting an affidavit. “In Haryana, more than 15 applications have been received, out of which 8 registrations have been issued while others are in the pipeline and will be issued shortly.”
Understanding the process
KPMG National Head of real estate and construction, Neeraj Bansal, said that developers were not aware of what has to be done. “Many in the industry are thinking that there are certain forms which have to be filled and a law firm has to be hired to do it for them. There is much more to it before the form comes into the picture. Both for the government machinery and developers, the mammoth task is to understand the system,” explained Bansal. He added that an Act and rules have to systematically be applied which is a significant effort and for which continuous guidance is needed.
Tutorials from Naredco
In order to guide developers on how to go about the new law, Naredco chairman and DLF head, Rajeev Talwar, said that Naredco had been organising paid-for services to guide developers on how to be RERA-ready. “We need to change the mind-set for RERA to kick in,” he added.
Diligence to curb structural defects
Haryana’s Sihag further added that his was the only state that had a system in place wherein a developer used to give an undertaking to manage a project for a period of 5 years. “Structural defect has been defined explicitly in the state Act, thus, ruling out any confusion on what a structural defect is, at least in Haryana”. However, De Sa added, “Any builder worth his salt would not construct a poor building.”
KPMG’s Bansal said developers will have to work around this and create a process in a transparent manner. “Unlike in the past, they will now have to create a back-to-back warranty with suppliers in case a challenge comes up. Starting from the point of contracting to execution and finally handing over, documentation has to be clearly spelled out. Workmanship is a loose term – is it tiles, paints, electrical wiring or something else? A developer will have to clearly spell out his liabilities in a transparent manner.”
Khaitan and Co Partner, Sudip Mullick, added that for structural defect for up to 5 years, a builder can appropriately cover himself through insurance. “The concern for the builders would be workmanship or quality of services because workmanship is a vague term and the applicability of workmanship for 5 years may pose a considerable challenge to the builder.”
Make registration number a marketing tool
De Sa went a step ahead to say that consumers should demand RERA registration number from developers before booking a unit. “In fact, developers could use this number as a marketing tool to push their projects and forums such as Magicbricks, can play a crucial role in creating awareness and advertise only such projects”. Talwar added that there should be drives by RERA authorities to educate all stakeholders.