Real Estate (Regulation

and Development) Act

Need for Transformation
Discussion Document
May 2016

KPMG.com/in

RERA (2016) - A REALITY for the REALTY Business

Key recent development
The Bill, which was introduced in 2013, was CLEARED by the PRESIDENT on 25 th March 2016
As per Gazzette NOTIFICATION 26 April 2016, RERA Act CAME INTO FORCE 1st May 2016
Following sections came in effect from 1st May 2016: Sec 2, Sec 20 to 39, 41 to 58, 71 to 78, 81 to 92
SEC 84

Appropriate government within MAX 6 MONTHS (OCT 2016) of NOTIFICATION to MAKE

RULES

SEC 20

Appropriate government within MAX 1 YEAR of NOTIFICATION to ESTABLISH RERA

Govt. to designate ANY OFFICER ( PREFERABLY SEC. HOUSING DEPT) as INTERIM RERA

SEC 85

Regulatory AUTHORITY within MAX 3 MONTHS from its constitution FORMULATE its
REGULATIONS for day to day functioning

SEC 43

REAL ESTATE APPELLATE TRIBUNALS to be formed within MAX 1 YEAR APRIL 2017

COMMITTEE chaired by SECRETARY HUPA under the Housing Minister is formulating MODEL RULES
They will also come up with MODEL REGULATIONS for Real Estate Regulatory Authorities

Remaining 22
SECTIONS

TO BE NOTIFIED relate to
Functions & Duties of Promoters

Rights & Duties of Allottees

Recovery of Interest & Penalties, etc

The MAHRASTHRA HOUSING ACT 2014 conclusively stands REPEALED from 1 st May 2016
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Pivotal pil ars of the Act

Compliance

Customer
centricity

Accountability

Transparency

Fiscal
discipline

Real Estate Act

Improve the perception of the sector among various stakeholders

Uniform regulatory environment

COMMERCIAL and
RESIDENTIAL projects including
PLOTTED DEVELOPMENT

Land under development MORE

THAN 500 SQ MTS / NO. of
UNITS exceed 8

Projects which do not have

COMPLETION CERTIFICATE
before commencement of ACT

RENOVATION or REPAIR or REDEVELOPMENT projects not involving Marketing, Advertising, Selling & New
Allotment NEED NOT BE REGISTERED

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Pivotal pil ars of the Act

Fiscal Discipline

What it entails
70% of the funds
collected from
allottees needs to
be parked in the
project account
Provision for RERA
to freeze project
bank account upon
non-compliance

Withdrawals to
cover construction
and land cost

In proportion to the
% completion
method

Withdrawal to be
certified by
Engineer,
Architect, and CA

Project Accounts to
be Audited / FY.
Copy to be
submitted to RERA

Provision for
stronger financial
penalties for RERA
non-compliances

Interest on delay
will be same for
customer and
promoter

Promoter to
compensate buyer
for any false or
incorrect statement
with full refund of
property cost with
interest

Number, type and

carpet area of
apartments

No arbitrary
cancellation of
units by promoter

Consent from
affected allottees
for any major
addition or
alteration
Project completion
time frame

Consent of 2/3rd
allottees for any
other addition or
alteration

No false statements
or commitments in
advertisement

Informing allottees
for any minor
addition or
alteration

No launch or
advertisement
before registration
with RERA

Transparency

What it entails
Quarterly updating of
RERA website with
details such as
unsold inventory and
pending approvals
Consent of 2/3rd
allottees for
transferring majority
rights to 3rd party

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Pivotal pil ars of the Act

Quarterly update of project
progress along with pending
approvals on RERA website

Every officer of a company, who

was in charge or responsible will
be liable for the conduct of the
company and deemed to be
guilty

Offence by an officer committed

with the consent or connivance
of any director, manager,
secretary or other officer of the
company, will also be guilty

What it entails
Sharing information project plan,
layout, government approvals,
land title status, sub contractors

Increased assertion on the timely

completion of projects and delivery
to the consumer.

An increase in the quality of

construction due to a defect
liability period of five years.

Formation of RWA within specified time

or 3 months after majority of units have
been sold

Consent of 2/3rd allottees for any

other addition or alteration

Consent from affected allottees for

any major addition or alteration

Informing allottees for any minor

addition or alteration

No false statements or
commitments in advertisement

Unbiased interest on delays

2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Customer centricity

Accountability

What it entails

Pivotal pil ars of the Act

What it entails

Compliance

Registration of
agents/brokers with RERA
Authenticated copy of all
approvals, commencement
certificate, sanctioned plan,
layout plan, specification,
plan of development work,
proposed facilities, Proforma
allotment letter, agreement
for sale and conveyance deed
to be given when applying for
project registration with RERA

Timely updating of RERA

website

Dispute resolution within 6

months at RERA and RERA
appellate tribunals

Maximum 1 year extension in

case of delay due to no fault
of developer

Developers to share details of

projects launched in last 5
years with status and reason
for delay with RERA

Annual audit of project

accounts by a CA

Conveyance deed for

common area in favor of RWA

Mandatory registration of
new and existing projects
with RERA before launch

Separate registration of
different phases of a single
projects
Construction and land title
insurance
Project completion time
period

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Possible impact on sector

Initial backlog

Increased
project cost

Tight
liquidity

Rise in cost
of capital

Initially, a lot of
work is to be
done to get the
existing and new
project
registered.

Registration with
RERA and
insurance cost
for construction
and land title

Land and approval

costs to be meted
out of internal
accruals as prelaunch concept
may end.

The cost of capital

may go up as
developers may
now have to fund
the land and
approval cost
through equity.

Details such as
status of each
project
executed in last
5 years,
promoter
details, detailed
execution plans
etc. needs to be
prepared.

it may lead to a
shift in equity
financing from debt
financing
prevailing
currently.

With frequent
delay in obtaining
approvals, debt
funding may not
be an ideal route
for developers.

Consolidation

With entry in the

sector made
difficult, the
sector may
witness
consolidation

Strong financial
and execution
capability is
required to launch
a project.
The development
model/agreement
may gain
prominence

Increase in
project launch
time
The project
launch time may
increase since a
lot of time will
involve in finalizing
finer details before
launching a
project.

Details such as
complete
drawings, utilities
layout, etc. needs
to be finalized
before project
starts.

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Summarizing key action points

Overall diagnostic
Prioritization of
projects
Assessment of
people, process
and technology
to ensure
readiness towards
RERA
requirements
Prioritization of
possible findings
as immediate and
long-term goals

RERA readiness assessment

Project risk assessment
Trainings employee, brokers and
functional
Customer, vendor, and contractor
agreement assessment for
identification and mitigation of
potential RERA non-compliance
risks
Review and drafting of agreements,
contracts etc

Immediate

Medium term

Long-term

Institutionalize or re-engineer processes

such as project management, sales etc.
Organizational skill assessment and
performance management system
definitions
Strengthen sales, crm, process &
automation
Institutionalize periodic RERA, project,
process compliance audits

Organizational re-structuring (ringfencing promoters and top

management)
Explore mature project execution and
monitoring concepts such as PMO.

2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Thank You
Neeraj Bansal
Partner and Head Real
Estate & Construction
KPMG in India
nbansal@kpmg.com
+91 98186 52694

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situation.
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the KPMG network of independent member firms affiliated with KPMG
International Cooperative (KPMG International), a Swiss entity. All
rights reserved.
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