The real estate industry is an important part of the Indian economy, with linkages to over 250 ancillary sectors and employing more than 10% of India's workforce. In 2022, the Indian residential real estate sector made an astonishing development, reaching new sales records of 68% year on year, demonstrating the industry's prominence as one of the fastest-growing businesses in the country. After two years of being influenced by COVID, Tier 2 and Tier 3 cities have emerged as new key real estate trends in 2022, and the real estate market has set unparalleled standards that have kept their growing pace since 2021 despite the global slowdown. In comparison to the past 10 years, the top 7 prime residential markets in India achieved the largest sales during the first half of 2022-23. People appreciating the long-term benefits of owning a home rather than renting led to the segment's sustained development. An increase in earning potential, a desire for a higher quality of living, and a growing base of aspirational customers and their lifestyle changes have resulted in significant growth in the sector. The increased awareness of house ownership, combined with the government's advantageous affordable housing programmes, has resulted in a tremendous expansion in the affordable housing market.
Real Estate (Regulation and Development) Act (RERA)
The Real Estate (Regulation and Development) Act (RERA) was passed in 2016 to safeguard consumers' interests through regulation and promotion of the sector, as well as to provide grievance redressal channels to address disputes. After all the rules were accepted in May 2017, the RERA has effectively completed five years.
Section 2, sections 20 – 39, sections 41 – 58, sections 71 – 78 and sections 81 – 92 were notified with effect from May 1st, 2016 and the remaining sections of the Act to come into effect from May 1st, 2017.
The RERA Act is the most ground-breaking change in the Indian real estate sector since independence. It dismantled obscurity by requiring a uniform disclosure method, frequent financial monitoring, and a grievance redressal structure. RERA has made tremendous progress despite a re-alignment of interests that was not well received by its stakeholders.
Carpet Area Defined Under RERA Act
For RERA to be successful, numerous states had to enact it. The RERA Act called for the establishment of a regulatory authority, a website for statutory disclosure of information, and an adjudication tribunal to resolve disputes and infractions. RERA was notified by 22 out of 28 states, and 6 union territories (UT) adopted RERA within one year of its notification, demonstrating success in the first step of its implementation. States that have been notified and have a basic setup that includes a regulatory, appellate tribunal, web portal, and auditing officer can be regarded as fully operational under RERA rules.
5 Year Progress
Homebuyers were looking for justice after suffering because of unfinished projects, project delays, layout changes, additional fees, misleading promises, and unfair home-buying agreements. By establishing a distinct system to handle homebuyer complaints, RERA aimed to remedy this problem.
Source: Assocham and JLL
Agent registration increased from 33,270 in January 2019 to 71,514 in January 2023, representing a CAGR growth of 21%. Maharashtra accounts for the largest share of registered agents with 54% followed by Uttar Pradesh (8%), Rajasthan (7%), Karnataka (5%) and Haryana (5%).
Source: Assocham and JLL
The examination of registrations by state shows that a few states account for a considerable share of registrations. Maharashtra accounts for the largest share of 39% followed by Tamil Nadu (13%), Gujarat (11%), Karnataka (7%) and Telangana (5%).
Source: Assocham and JLL
Home loan net credit increased by US$ 56.14 billion (Rs. 4.6 lakh crore) from 2013 to 2017, nearly doubling to US$ 100.09 billion (Rs. 8.2 lakh crore).
Source: Assocham and JLL
Home loans are the most common financing option for home buyers, and payments made to project developers upon project completion reduce the need for additional funding. The continuing increase in housing sales following the implementation of the RERA resulted in less reliance on institutional funding. During 2013-17, the residential sector saw a capital injection of US$ 9.8 billion.
As there is a growing desire for larger houses with quality facilities and a supportive ecosystem, the development focus is changing from the mid-segment to the luxury category. The proportion of new releases in the premium market has increased in the last two years. In 2022, approximately 21% of new launches were in apartments costing more than US$ 1,83,091.49 (Rs.1.5 crore). It increased from a 4-6% share in 2016-2020 to 21% in 2022.
The RERA Act addressed the immediate concerns of purchasers and became the initial point of reference for homebuyers. The fact that a homebuyer seeks the project's RERA number to verify its details speaks eloquently about the trust that RERA has instilled in the minds of customers. Another crucial metric has been the number of complaints submitted and resolved so far. Various state regulatory authorities have successfully resolved over 1 lakh disputes in the last five years, demonstrating home buyers' trust in RERA as the appropriate platform to address their complaints.
Initiatives by various State RERA authorities
Maharashtra was the first state to take the lead in establishing a housing regulating authority. The Maharashtra Legislative Assembly approved the Housing (Regulation and Development) Bill, in 2012. The Maharashtra Real Estate Regulatory Authority is abbreviated as MahaRERA. Some of the MahaRERA efforts that have strengthened the openness of real estate in the state are as follows:
The forum facilitates amicable resolution of conflicts between homebuyers and developers, saving the expense and time of litigation. The forum received 1095 conciliation cases, of which 554 were resolved.
MahaRera has digitally mapped the entire state in order to assist home buyers in learning about their projects and neighbouring social facilities. The GIS mapping will assist purchasers in assessing the social and physical infrastructure of a project region.
MahaRERA employed online modalities such as video conferencing to restart regular hearings of cases, saving time and avoiding delays. The digital project guaranteed that all services and operations were delivered digitally, eliminating the requirement for a physical visit. An online helpline was established where homebuyers may call to get answers to their questions.
Gujarat RERA, also known as GUJRERA, was created because of the Gujarat Real Estate (Regulation and Development) rules, which were announced by the Gujarati government in 2017. The GUJRERA's main initiatives are as follows:
Gujarat RERA has created investment maps in the top five cities where the most registrations have occurred using technology. The projects are divided into three groups based on their attributes: Elite, Premium, and Economy. This aspect, together with project progress, can assist investors in selecting projects that meet their demands.
The information gathered through digital compliance has been used to track and categorise projects based on their development. These projects are categorised as Complete, Regular, First Timers, and Under Watch. The project progress is further categorised as on track, sluggish, very slow, and ill. This information will assist the state in identifying stopped or delayed projects and will assist homebuyers in taking prompt action in the form of complaints.
The Uttar Pradesh RERA Rules were published in 2016, and the state's RERA website was activated on July 26, 2017. In order to ensure that complaints are handled by the officials it has authorised under Section 81 of the Act utilising a web-based management system, the UPRERA established Permanent Authority in 2018.
Projects and developers will soon be graded by UPRERA according to several criteria, including financial soundness, organisational structure, and certifications, track record, adherence to regulations, and client comments. The purpose of the grading system, which will be carried out yearly, is to evaluate and rate the promoters and projects registered with UPRERA so that homeowners can make an informed decision. This grading scale will assist promoters in developing a track record and a better understanding of concerns such as possession delays.
The creation of RERA to address homebuyers' concerns about trust and accountability has begun, but it is still a work in progress. The approval of RERA by 27 states and 8 union territories in the last five years has been the first successful step towards national acceptability. Since the RERA was implemented in various states, about one lakh projects and 71,514 agents have been registered, with over one lakh consumer disputes settled. Some states have taken various measures to fulfil the requirements of homebuyers in areas such as dispute resolution, information accessibility, and reconciliation councils. The RERA has been an exclusive regulation, with no comparable prior regulations anywhere in the world. Future RERA developments are anticipated to serve the needs of all stakeholders while upholding the fundamental values of transparency and trust. In this context, by establishing a national body with the participation of the state, RERA authorities can aid in maximising synergies and best practices and develop a national consensus for enhancing the real estate industry.