5 years of RERA progress: The journey of increasing trust

The Real Estate (Regulation and Development) Act (RERA), which was passed in 2016 with the final rules getting notified in May 2017, is the most reformatory regulation for Indian real estate. The real estate sector being a state subject, the adoption of the RERA regulation by the states was key to its success. The adoption of RERA by almost all states has been an achievement. The completion of five years of effective implementation of RERA reveals the extent to which it has been able to achieve its objectives. It also helps us to gauge the way forward and some key changes that are needed to make the reforms beneficial for homebuyers and other stakeholders. The report covers the progress of RERA on various parameters through the lens of creating a sense of trust by increasing transparency and accountability in the sector.

The impact of RERA can be assessed from the operational progress of the residential sector during the 2016-22 period. Though broader policy reforms that impacted real estate were introduced during the same period, the performance of the residential sector was primarily due to the increased transparency and trust infused by RERA. Residential sector sales and launches improved once the new process was in place and all stakeholders were aligned with changes made by RERA. The growth of the residential sector and other factors that supported the growth barring the hiatus led by the pandemic have been dwelled upon.

The impact of RERA led to improvement in accountability which brought financial discipline to the sector. This has been reflected in a shift in the capital flows witnessed by the sector. Since a large portion of home buyers avail of mortgage loans, the increased home sales led to a sharp rise in home loan growth which was disbursed to developers based on the stagewise completion of the project. The escrow mechanism introduced by RERA led to the proper utilisation of funds. The increased home sales led to improved cash flow for developers and reduced dependence on institutional capital funding needs. Thus the overall impact has been improving the financial health of the sector. We hope the report provides you with valuable insights into the progress of RERA and the way forward.