RERA Implementation: A Tale Of Disparities Among Indian States

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New Delhi, 6th August 2023: Owning a house is a cherished dream for every Indian. However, the home-buying process is often perceived as fraught with challenges. Many individuals fear not receiving the promised house or facing delivery delays, leading to numerous daunting issues. The mismatch of expectations between homebuyers and builders often results in prolonged disputes that are both costly and time-consuming. In extreme cases, some builders even fail to deliver the houses, leaving buyers entangled in bankruptcy court battles.

The Real Estate Regulatory Authority (RERA) has been a transformative force, significantly reducing the range of problems faced by homebuyers. RERA holds builders accountable for their commitments through penalties, empowering buyers to seek resolution of disputes without overburdening the court system. On paper, RERA was a groundbreaking move to cleanse the sector’s image, and it stood out as unique legislation globally. However, the success of RERA lies in its implementation, which varies among states in India.

As RERA was a state subject, not all states embraced it with equal enthusiasm. Some states have taken aggressive action against builders for violations, while others have been less proactive. Likewise, certain states have focused on providing more information to consumers, despite the legislation’s primary goal of reducing information asymmetry.

Another area of disparity is in the adoption of Alternative Dispute Resolution (ADR) mechanisms within RERA. Section 32(g) of the RERA Act offers alternative methods such as mediation, conciliation, and arbitration as viable options instead of conventional legal proceedings.

For instance, Maharashtra RERA (MahaRERA) pioneered the use of conciliation, setting up 45 conciliation benches across the state. This approach boasted an astonishing 75 per cent resolution rate initially, with cases being resolved within two months compared to 8-10 months under RERA orders. The success of MahaRERA’s conciliation model can be attributed to its voluntary nature, involving only willing parties, representatives from builder and consumer groups, and skilled negotiators while discouraging the involvement of lawyers. Additionally, disputes had to be addressed through conciliation before being formally registered with RERA, ensuring confidentiality for the parties involved.

Despite the success of conciliation in Maharashtra, only six out of 28 states in the country have adopted this model (Maharashtra, Gujarat, Uttar Pradesh, Haryana, Karnataka, and Madhya Pradesh). Among these, Maharashtra and Uttar Pradesh have been particularly proactive in making conciliation their primary dispute-resolution strategy. Some states, like Karnataka RERA, have opted for the Lok Adalat mechanism, which employs retired judges and legal professionals to resolve disputes through a court-like process. However, the efficacy of Lok Adalat as an ADR mechanism is unclear due to the lack of data on unsettled cases in the public domain.

Every RERA must consider ADR mechanisms, especially conciliation, as an essential tool to resolve disputes and reduce pending cases. A well-designed process can align the incentives of both builders and buyers, fostering trust in the real estate sector. Builder associations, such as CREDAI and NAREDCO, should encourage their members to seek amicable settlements to enhance confidence in the industry.