REAL ESTATE REGULATORY ACT, 2016

Aim of the act?

• It is intended to protect homebuyers by providing a framework for reducing conflict with developers, and creates a regulatory authority for this sector.

Q A
Aim of the act?
  • It is intended to protect homebuyers by providing a framework for reducing conflict with developers, and creates a regulatory authority for this sector.
  • The real-estate sector is unorganised and unregulated. To rectify the alleged problem, a new round of registrations, regulations and clearances are being created.
Challenges to the act; its criticism?
  • It’s likely to enhance the regulatory burden and increase the cost of capital and compliance. The buyers, particularly at the lower end of the spectrum, may actually end up paying the price.
  • Property developers are not exactly cheering the law because of a sense of unease due to a possible increase in the cost of capital, especially since this industry is already facing a liquidity crunch and mounting inventories.
  • While there are strict penalties, including imprisonment, for developers if they slip up, there is hardly any provision to make the various government authorities, entrusted to oversee and enforce regulations, more accountable.
  • The RERA’s requirement — that 70 per cent of capital from a particular project be restricted for use only for that project — is well-intentioned but may have little economic merit. The law is likely to raise the cost of capital.
  • The RERA also lays out a dispute settlement mechanism. But given the experience of consumer courts, it’s only a matter of time before the new mechanism gets as clogged as some of the others.

WORD FROM TEAM GS-SCORE –

Context Parliament has recently passed the Real Estate Regulatory Act, 2016 (RERA),
Relevant for

Infrastructure of GS:3
For further detail Refer article titled “Real estate non-rescue” from Indian express dated march 26, 2016

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