C V Swathy

UM4050

PUM21367

The real estate industry is a significant contributor to the Indian economy, with high potential for growth and investment. However, the lack of regulation in the industry has often led to numerous issues, including project delays, disputes, and unfair practices. To address these concerns, the Indian government introduced the Real Estate Regulatory Act (RERA) in 2016, aimed at promoting transparency, accountability, and standardization in the real estate sector. The aim of the project is to examine the Real Estate Regulatory Act, 2016, assess the project maintenance management of RERA-registered projects in the state of Karnataka, focusing on Bangalore, analyze the importance of maintenance management for primary stakeholders, and study how RERA-registered projects are handled. The expected outcomes are to compare the effectiveness of RERA on real estate project maintenance management before and after implementation, as well as to identify any shortcomings and challenges faced by stakeholders. In India, the real estate sector encompasses housing, retail, hospitality, and business, making it a significant industry with significant economic and social implications. Nonetheless, the industry has faced a variety of challenges, such as a lack of information, financial discipline, authority, limited grievance redressal, and issues with agreements and transactions. To address these issues and ensure transparency and accountability in the industry, the Real Estate Regulatory Act (RERA) was enacted. The Act's key goals, as well as its main provisions and features, are presented in the study. Additionally, the study evaluates the state-wise implementation of the RERA Act and the Karnataka RERA Rules, 2017, in depth. Furthermore, the study focuses on the life cycle of a project, which consists of pre-development, development, and post-development phases. In the pre-development phase, developers conduct feasibility studies, secure financing, obtain approvals, and register projects with RERA. In the development phase, the actual construction of the project takes place, and once completed, the project is marketed and sold to potential buyers. In the post-development phase, the project is handed over to buyers, and ownership of the apartments is transferred. The buyer then maintains the property through the RWA. Major stakeholders are identified during this phase, and their roles, responsibilities, and risks are outlined. Each stakeholder has a unique set of responsibilities, and they play a critical role in ensuring the project's success. Despite the importance of each stakeholder's role, there are positives and negatives associated with different stakeholders. The introduction of RERA in India has had several positive impacts for real estate purchasers, including increased affirmation of timely completion and delivery of projects, mandatory project registration with a timeline for completion, improved construction quality, and transparency in agents/brokers, project delivery history, and pricing. However, there are also negatives, such as delays in project approval, higher prices, and a lack of awareness. RERA has the potential to increase efficiency and investment for developers, but it also has limitations and may create liquidity constraints and maintenance misunderstandings. Additionally, the study elaborates on maintenance management. This details the maintenance procedures that must be planned, carried out, and monitored to prevent breakdowns, minimize downtime, and lengthen the lifespan of the structure and its amenities. While the RERA act does not extensively explore maintenance management, a crucial clause advises developers to repair structural defects within 5 years without additional costs. The maintenance clause is also detailed in some states. Some of the key clauses include ensuring that the necessary services are supplied and maintained at fair prices until the association assumes responsibility for project maintenance. Maintenance fees can only be collected after obtaining BU permission. The builder must also maintain a separate account for any income received from the purchaser/allottee as a contribution to a corpus fund or for building maintenance, and they will not be allowed to use this fund for any other purpose. Finally, any interest earned on the maintenance funds will be credited to the same accounts and must be certified by a chartered accountant that demonstrates the money was used solely for the intended purpose. The Karnataka Real Estate Regulatory Authority (K-RERA) also offers an online platform for filing complaints against developers or purchasers. After registration, the complaint is verified and scrutinized. If the documents submitted are in order, the complaint is accepted and assigned a complaint number, and the respondent is notified. Complaints can be filed using Form N or Form O, with the authority comprising six benches and the adjudicating officer. The majority of complaints received in K-RERA authority are related to delay in possession of properties, refunds, and delay compensation, and the complaints received by the adjudicating officer are related to mental agony, compensation due to non-completion of amenities, and compensation for structural defects. Finally, surveys were conducted among purchasers and developers in Bangalore to gather information about the implementation and impact of the RERA Act and to understand the effects on maintenance management. The surveys revealed that large and small-scale developers faced different challenges in terms of project registration, business processes, marketing, and maintenance management. For buyers, there was a lack of awareness of the act, and many were unaware of RERA regulations and registration benefits. The study also identified areas of concern in the Act and made recommendations for Karnataka RERA rules. Firstly, public awareness campaigns should be initiated to educate people about the RERA Act and its benefits. Secondly, there should be a clear definition and clause for structural defect liability, and the roles and responsibilities of all stakeholders involved in the construction process should be clearly defined. Moreover, the complaint and conciliation process should be streamlined and more effective. Lastly, the absence of proper maintenance management in the RERA Act should be addressed, and awareness campaigns should be conducted to educate people about the RERA website and the complaint filing process. As a result, consumers will be able to make more informed decisions, and the real estate industry will become more transparent and efficient. To summarize, RERA has succeeded in regulating and safeguarding the real estate industry, but there are areas that still need improvement. The study provides valuable insights to enhance the Rules and ensure a transparent and efficient sector. One crucial aspect that requires further consideration and clarification is the liability clause, which is not extensively covered in the RERA Act. Additionally, the study reveals that there is a lack of awareness among buyers about RERA and maintenance management, which is concerning and needs to be addressed for the industry's transparency and efficiency.  


Report Content

Background of the Study - The Real estate is one of India's strongest economic pillars. The sector is evolving because of rapid urbanisation, shifting consumer preferences, regulatory changes, and the effects of the pandemic. Developers had adopted an aggressive pricing strategy during the previous few months with spot discounts, finance offers, stamp duty waivers, and other freebies to attract customers and drive sales. By the end of 2021, it was noted that there was a decline in this occurrence because the price reduction in most sectors had been stopped. All cities reported a YoY increase in prices per square foot during Q1 2022, signalling that the residential real estate market has seemingly turned the corner. During Q1 2022, Bengaluru experienced the highest rate of price growth (7% YoY), followed by Pune and Mumbai (5% and 4% YoY, respectively).

The Indian real estate industry remained mainly unorganised and beset by several problems as despite its growing importance. All stakeholders in the ecosystem had less than ideal experiences an outcome of these constraints. Major concerns include: • Lack of Information - The buyers are not entitled to information or access to the required property documents. Also, there is lack of communication between the buyer and the developer which is one of the major concerns leading to false information and promises. • Lack of Financial Discipline - In case of the flow of fund, the developer delays projects by transferring funds from one to another or the developer use the fund for other activities leading to the delay of the project. In such instances where there are delays or problems with the agreement, the buyers are not entitled to compensations. • Lack of Authority - The buyers are not allowed to make complaints or seek guidance in the event of fraud or any other issues with the develope

The Department of Housing, Government of Karnataka is the primary department responsible for implementing the Act in the state of Karnataka. The Act was put into effect on May 1, 2017, and the government of Karnataka issued the Rules on July 10, 2017. There are about 6,672 projects applied for registration in the state in which 1,051 are unregistered projects and are under investigation. 3827 agents are registered as per the Act. 7,904 total complaint and 23 conciliation are registered in RERA. A total of 1870 projects are under investigation and there are 8,297 complaints under investigation against promoters. Total record for realization of relief is 941 from which Rs.38,50,92,762 have been collected. The Karnataka Real Estate Appellate Tribunal has territorial authority over the whole of Karnataka. The appeal tribunal is composed of a chairperson and two members, one of whom should be a judge and the other of whom must be a specialist or administrator.

The lifecycle of a real estate project involves several stages, each with its own set of activities and stakeholders. These stages include pre-development, development, and post-development. In this process, the key stakeholders are the developer and the buyer.

The judicial mechanism of the Real Estate Regulatory Authority (RERA) is designed to ensure that disputes between real estate developers and homebuyers are resolved in a fair and timely manner.

The Karnataka Real Estate Regulatory Authority (K-RERA) provides an online platform for registering complaints against developers or builders. The complainant can register the complaint by filling up Form O or Form N on the K-RERA website.

The key areas of concern for both large- and small-scale developers highlight the different challenges they face in the industry. By addressing these concerns, RERA can help create a more level playing field for developers of all sizes and ensure the industry operates in a transparent and ethical manner.

The survey findings suggest that there is a need to create more awareness about RERA regulations and mandatory rules among the public. Home buyers should be informed about the benefits of RERA and the complaint redressal mechanism available to them. Moreover, efforts should be made to educate the public about the structural liability clause and RERA frameworks related to maintenance management.

RERA has made significant strides in improving the transparency and accountability of the real estate sector. However, there are still areas that require further clarity, especially in maintenance management. Providing clear definitions, timelines, and compensation mechanisms will go a long way in ensuring that the interests of all stakeholders are protected.

The primary surveys, literature reviews, and survey analysis conducted have provided evidence that maintenance management is a grey area that is not being covered in detail in the RERA Act. The findings also highlight the need for further consideration and clarity on this critical aspect of the real estate industry. The absence of proper maintenance management can impact the structural integrity of the buildings and create a negative impact on the quality of life of the residents. Therefore, it is necessary to address this issue and incorporate maintenance management in detail in the RERA Karnataka rules.