Fallty towers: Lesson from the Supertech demolition: reduce the risk borne by homebuyers, improve Rera

Source: The post is based on an article “Fallty towers: Lesson from the Supertech demolition: reduce the risk borne by homebuyers, improve Rera” published in The Times of India on 29th August 2022.

Syllabus: GS 3 – Government policies for various industries

News: This article discusses the issues associated with real estate in India and about Real Estate (Regulation and Development) Act, 2016.

The demolition of Supertech Twin Towers in Noida cheered many, and it was the news that was seen throughout the media.

What are the issues with real estate?

Indian households hold about 77% of total assets in real estate. It’s the largest single investment most families make.

This makes homebuyers, disproportionately, vulnerable to real estate sector risk.

The tripartite agreement between builder, bank, and buyer requires the buyer to pay a part of the project cost in advance. The bank covers the residual cost and the builder underwrites EMIs, till possession is handed over.

There are a number of cases in this tripartite agreement where builders default and banks chase the hapless buyer despite the agreement detailing the obligations of all sides.

In one such case, the Delhi high court this year ordered interim protection to buyers against threat of action by banks. But there are many such cases.

Despite e-governance initiatives, there is hardly any change on the ground.

So, any meaningful reform has to address the spread of risks among stakeholders.

What is the Real Estate (Regulation and Development) Act, 2016?

It was enacted in 2016.

The advantages of RERA are:

• It brings about the standardization of contracts.
• It reduces the information asymmetry between buyers and other stakeholders by making relevant information public.
• It also minimizes misuse of advance payments made by buyers.

What are the issues associated with RERA?

It can’t address older problems like that of the Supertech towers.

It cannot resolve the issue of corruption at the level of urban bodies.

It also suffers from the general weakness in state capacity as each state needs to establish a regulatory body.

However, RERA is the best available solution today. It will require state governments to invest in enhancing its capacity because a better system will benefit the buyers.