An RERA has emerged as a changer in recent times, with the establishment of the
RERA (real estate) Regulation & Development Act, the government ensures each
state has a regulatory body for the effective real estate sectors with a smooth
implementation. It aims to safeguard the interests of property buyers while
promoting a more organized and regulated real estate market with proper product
pricing, buyer protection, and the builder's accountability.
Challenges encountered in the residential real estate sector
In the world of residential real estate, many challenges have come up that
affect how things work. These challenges are like obstacles that people involved
in real estate, need to deal with. They are part of how the industry operates
and can be both complicated and bring chances for improvement. To succeed in
real estate, it's important for those involved to understand these challenges
and find ways to adapt and do well in a changing real estate world.
The real estate sector grapples with significant challenges, as revealed by
recent surveys. A JLL survey from 2020 indicates a staggering 0.46 million
unsold properties valued at $50 billion, coupled with 0.95 million properties in
the construction phase worth 110 billion, as reported by liases foras of RBI.
This surplus inventory and poor demand scenario not only hinders cash flow but
also restrains sales, resulting in trapped funds.
Adding to the complexity is the inefficiency in project management, a prevailing
issue in the industry. Challenges such as multiple approval requirements,
insufficient funding sources, and budget overruns due to substantial delays
contribute to the hindrance in effective project management. Together, these
factors underscore the pressing need for strategic solutions to address both
unsold inventory and project management inefficiencies in the real estate
landscape. Another issue is the lack of transparency in the industry. The real
estate agents must register their projects, however, most of the projects are
not necessarily verified by the authority.
Lastly, it can be noted that along with sales, post-sales are also one
challenge. While the real estate sector traditionally prioritizes sales, the
often overlooked aspect of post-sales property management plays a crucial role
in fostering long-term relationships with homeowners and facilitating seamless
resale opportunities. Despite its significant value, post-sales services are
Economic returns in real estate have concentrated on capital appreciation, with
minimal attention given to rental yields. In the residential sector, rental
yields typically hover around 1-2%, presenting a less appealing opportunity for
investors, especially considering the overabundance of over 11 million vacant
properties in urban India. This underscores the need for a shift in focus
towards comprehensive post-sales strategies to enhance the overall
sustainability and attractiveness of real estate investments.
In its mission to protect property buyers, RERA establishes a structured
framework, streamlines workflows, and eliminates delays in the real estate
industry. This is achieved through stringent measures that ensure builders meet
delivery deadlines, with compensation mandated for any delays. RERA also
prevents unjust practices, such as charging for extra space, diverting funds for
other projects, and making false commitments.
In essence, the act serves as a
regulatory force, setting ground rules to benefit buyers and stakeholders alike.
Committees formed under RERA further ensure compensation for individuals facing
injustice, contributing to a more transparent and accountable real estate
Demystifying key features of RERA in real estate governance
RERA provides several protections for buyers. In India, RERA minimizes the risk
of builder bankruptcy by ensuring that 70% of the amount from allottees assigned
to real estate projects cannot be used for other projects. This reduces the risk
of default and protects the interests of buyers. 
Another feature of RERA that benefits buyers in case of default is the interest
rate compensation. If buyers fail to pay their dues in time, they will pay an
interest amount that is lower than the penal rate mentioned in the sales
agreement. This is calculated as 2% plus the highest marginal cost of lending
rate (mclr) of the State Bank of India. The Real Estate Act mandates
developers to disclose the carpet area, encompassing the net usable floor space,
excluding external walls, balconies, etc. Buyers, protected by RERA, hold
In case of false promises, they can withdraw, receiving a full
refund. Within 5 years of possession, defects can be reported for developers to
rectify within 30 days. In case of title defects, compensation can be demanded
even after possession. The act ensures transparency, granting buyers access to
project details through RTI, including plans, execution, progress reports, and
Further, RERA forbids a promoter from accepting an advance payment amounting to
a sum higher than 10% of the total cost from the buyer. Developers can only
accept such an amount if they have entered into a legal agreement of sale with
the buyers. RERA extends a comprehensive set of rights to safeguard buyers
against malpractices in real estate. Buyers can withdraw and receive a full
refund in case of false promises.
Within the initial 5 years of possession,
defects can be reported, and developers must rectify them within 30 days. In
case of title defects, compensation can be demanded even after possession. RERA
ensures transparency by granting buyers access to project details through RTI,
covering plans, execution, progress reports, and status.
The act establishes a
grievance redressal mechanism, empowering state-level real estate regulatory
authorities to address concerns. Dissatisfied parties can appeal to the
appellate tribunal within 60 days, with builders having the right to
Win-win for all stakeholders in real estate
RERA's impact extends beyond just benefiting buyers; it creates a win-win
scenario for all stakeholders, including developers, agents, and the entire
industry. Buyers experience enhanced transparency, secure fund commitments, and
overall justice. Developers gain increased funding revenues, smoother approval
processes, higher investments, and improved project efficiency.
agents benefit from a structured sector and management efficiency, while the
industry enjoys a regulated environment, improved governance, system
transparency, and heightened investment.
For buy and sell transactions, the rear boosts buyer confidence, leading to
increased residential project sales. RERA registration becomes essential for
project or property sales, ensuring proper execution of sales agreements and
mandatory registration before relevant authorities.
In terms of rental and property management, the surge in residential real estate
sales translates into expanded business for these sectors. Buyers now recognize
the importance of rental yield alongside capital appreciation, relying on
management companies for tenant acquisition, occupancy maintenance, and asset
upkeep. With RERA's project execution discipline and warranties, the overall
quality of apartments improves, contributing to better capital appreciation and
In conclusion, the Real Estate (Regulation and Development) Act (RERA) has
emerged as a transformative force in the residential real estate sector. By
addressing challenges, such as unsold inventory, poor demand, and inefficiencies
in project management, RERA aims to create a more organized, transparent, and
The act not only safeguards the interests of property
buyers but also establishes a win-win scenario for all stakeholders, including
developers and real estate agents. RERA's comprehensive framework, coupled with
key features like standardized carpet area disclosure and buyer rights, seeks to
ensure fairness, streamline processes, and enhance the overall sustainability
and attractiveness of real estate investments in India.