Success of Real Estate Sector and post-COVID analysis

This blog is inscribed by Vagish Yadav.

Recently India was ranked 34th in the JLL’s Global Real Estate Transparency Index[1]. The rank has consistently improved from 39th in 2014 to 35th in 2018 bi-annual survey. Credit of the improved rank is given to the regulatory reforms brought by the Government in 2016 in the form of the enactment of Real Estate (Regulation and Development) Act 2016[2]. The act was enacted with the object of establishing a regulatory authority to regulate and promote the real estate sector. The act is also sometimes seen as a safety net for the allottee or the consumer but the authorities have stated time and again that the act is not only allottee centric but gives equal regard to the promoters as well as allottees.

For facilitated analysis, this article is being divided into three parts:

  1. RERA before COVID-19
  2. RERA during COVID-19 
  3. RERA Post COVID-19

RERA BEFORE COVID-19

In 1st RERA Conclave organized by UP RERA on 4th November 2019, various best practices of all the RERAs across the country were compiled. Best practices[3] of RERA of Chhattisgarh, Gujarat, M.P, U.P, Rajasthan, Haryana, Punjab, Maharashtra and Tamil Nadu were accumulated for the other RERA to fill in the lacunae in the regulation and to follow in the footsteps of these RERA.

Some of the most important factors emanating from Real Estate Law which have created transparency in the real estate sector are analyzed below.

1.     Registration of Project and Strict Obligations of Promoters

 Registration of a real estate project can be done under Section 3 of the Act. This is a mandatory compliance and every promoter needs to get the Project registered under Section 3. Moreover, the jurisprudence has evolved in such a way that a complaint can be filed against an unregistered project also.[4] This was a major step and hence brought all the projects statutorily permitted under the purview of the Act and hence complied with Article 14 of the Constitution of India[5]. This provided transparency in the process of registration and built clarity and trust for the homebuyers.  

2.     Redressal of complaints –

The RERA has the authority to entertain a complaint under Section 31 of the RERA Act 2016. There are two authorities at the primary level, i.e. Real Estate Regulatory Authority and Adjudicating Officer. The complaint is filed before the RERA and the dispute is resolved accordingly. If the aggrieved seeks compensation under the Act for the grievance caused to him, the Adjudicating officer shall adjudge the quantum of compensation in accordance with Section 72 of the Act. This clarity of jurisdiction was further increased which has contributed to effective judgment process and transparency.

3.     Online System

In times of COVID, the whole judiciary has adopted the online dispute redressal system wherein cases are taken up online through video conferencing. But before COVID, UP RERA had been planning to go completely online such that the parties need to be present before the court physically only during the final hearing[6]. The whole system of filing of complaint and further procedure has been taken from offline to online. This ensures further transparency. After UP RERA, other RERAs are also going online.

4.     Inclusion of labour involved in Real Estate Projects by RERA

 Inclusion of labour is a socialist approach if taken by the authorities. This will also lead to greater transparency as the voices of the labour could be heard. In view of the above, Maharashtra RERA or MahaRERA had started the MahaRERA skilling initiative[7].

RERA during COVID

On 14th March 2020, COVID-19 was declared as a “Notified Disaster”, hence, invoking Disaster Management Act 2005. In view of the aforementioned, nation wide lockdown was imposed in phases which has continued to stay in effect for some areas even till now.

Under Section 6 of the RERA Act, it has been provided that the registration of real estate project under Section 3 can be extended on grounds, inter alia, Force Majeure. The act explains Force Majeure as follows:

force majeure” shall mean a case of war, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature affecting the regular development of the real estate project.

Force Majeure clause is invoked after the promoter submits an application for extension of registration. The proviso to the section provides that the authority may extend the registration period in reasonable circumstances without default on the part of the promoter.  Since, the Ministry of Home Affairs has already declared that COVID-19 a Notified Disaster, the Force Majeure clause was the need of the hour.  

Various RERA in the initial phase of lockdown had already ordered for postponement of 30 days. Labourers in large number had starting migrating to the villages due to non-availability of work. Supply chains of material were closed as the inter-state movement was prohibited, and were opened only in June 2020.  Due to these factors, consequence ensued is that the construction activity had come to a standstill.

To provide relief to the promoters, various RERA starting with MahaRERA had expanded the registration validity for a further period of 3 months. This was followed by other Real Estate Regulatory Authorities like Karnataka RERA and UP RERA.

It is pertinent to note that the UP RERA begun online hearings via Video Conferencing from 18th May 2020.  Moreover, MahaRERA has also started the online hearings[8] ensuring zero paperwork and no physical attendance since June 2020. Further, decisions have been taken by the authority to extend the time upto 6 months for completion of projects.

RERA Post COVID – the way forward

After the unlock 1.0 announced by the Government of India, the aim must be to ensure the reverse migration in the big cities where the real estate sector flourishes. The aim must be to ensure that within 6 months, employment must be ensured and the projects must be completed within the extended time limit in order to curb the grievances of the homebuyers who have been unsure of their allotment time. It has been clarified that since the registration has been extended, no compensation shall be provided to the homebuyers because of the delay on account of Lockdown.

NAREDCO had requested the Government to provide around $200 billion for the resuscitation of the real estate projects and save the promoters from the wrath of bankruptcy[9].

Also, RBI had granted a further 3 month moratorium period for EMI Loans[10]. These steps were all taken in coherence to prepare the Real Estate Sector for the aftereffects of COVID-19.

It is pertinent to mention that post-COVID, the trends in the real estate sector shall change. It may become a common practice that the people might choose to leave the big cities and live in quiet and peaceful places. These calls for the promotion of the real estate sector in the smaller cities. Hence, there may be a shift of the investments from big cities to the smaller cities. Though, this migration may be in small numbers, it could be significant.  Section 32 of the Act provides the functions of the Real Estate Authority for promotion of real estate sector. Hence, performing its functions, the Authority must look into the expansion of real estate sector considering the effects on environment and other factors.

UPRRERA and other authorities are planning to approach RBI for one-time debt restructuring[11]. Since, lockdown has affected the promoters; Debt Restructuring is a viable option. This will not only be in the interest of promoters, but buyers and employees as well. It is also to be kept in mind that the real estate sector is the second largest employer after agriculture, hence, in the interest of social justice, steps need to be taken to relieve the sector from financial burden.

Conclusion

Real Estate Authorities around the country are the fastest in terms of implementation. Due to the importance real estate sector holds in the society, it has been successful in India. It is also hoped that post COVID, the sector will further develop with its new initiatives like online e-Courts, single window system of registration, effective complaint mechanism and training of labor involved among others.


[1] Business Today, India’s Ranking in JLL’s Global Realty Transparency Index improved to 34th spot, available at https://www.businesstoday.in/sectors/infra/india-ranking-in-jll-global-realty-transparency-index-improves-to-34th-spot/story/409171.html (Last visited on 13th July 2020)

[2]India Code, Real Estate (Regulation and Development) Act 2016,  Available at https://www.indiacode.nic.in/handle/123456789/2158?locale=en

[3] Report on Best Practices of RERA, 1st RERA Conclave, 4th November 2019, Available at https://up-rera.in/pdf/Best_Practices_by_UP-RERA.pdf

[4] M/s Silver City Construction Ltd v. State of Punjab and others, REAT, 2019

[5] Omaxe ltd v. Arun Prabha, RERA, 2019.  

[6]  The Economic Times, UP RERA to move to E-Court system, available at https://economictimes.indiatimes.com/industry/services/property-/-cstruction/up-rera-to-move-to-e-court-system/articleshow/73705300.cms (Last visited on 13/07/2020, 3:29PM)

[7] Report on Best Practices by RERAs, https://up-rera.in/pdf/Best_Practices_by_UP-RERA.pdf (Last visited on 13/07/2020, 2:32PM)

[8] Indian Express, MahaRERA to go digital, resume regular online hearings, available at https://indianexpress.com/article/india/maharera-to-go-digital-resume-regular-online-hearings-6457797/, (Last visited on 12.07.2020, 4:18PM) 

[9] The Hindu, NAREDCO and ASSOCHAM ask Government for $200 billion relief package, available at https://www.thehindu.com/business/Industry/naredco-assocham-ask-government-for-200-billion-relief-package/article31302518.ece (Last visited on 13/07/2020, 3:32PM)

[10] The Economic Times, RBI allows 3 month extension of loan EMI moratorium: Should you opt for it?:
available at https://economictimes.indiatimes.com/wealth/borrow/rbi-allows-3-month-extension-of-loan-emi-moratoriumshouldyouoptforit/articleshow/75888773.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst (Last visited on 13/07/2020, 3:35PM)

[11] OrissaPost, RERA to approach RBI seeking one time debt restructuring for industry, available at https://www.orissapost.com/rera-to-approach-rbi-seeking-one-time-debt-restructuring-for-industry/ (Last visited on 13/07/2020, 3:38PM)

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