The Real Estate (Regulation and Development) Act, 2016 (RERA), was introduced to bring much-needed transparency and accountability to the real estate sector in India. While it has empowered homebuyers to a significant extent, there’s still a glaring issue that remains unaddressed: accountability for real estate projects is limited almost exclusively to the promoter. This leaves homebuyers vulnerable when other stakeholders who also benefit financially from the project are not held accountable for their roles.
In this blog, we’ll explore why RERA’s accountability framework needs to include all stakeholders involved in a project—from financial institutions to contractors—to ensure that homebuyers receive the protection they deserve.
The Problem with Current Accountability Under RERA
Under RERA, the promoter of the project is responsible for registering the project, maintaining financial transparency, and delivering it on time. However, real estate projects involve multiple stakeholders, including:
- Financial Institutions: Banks and other lenders fund the project and often profit from it through interest or equity arrangements.
- Contractors and Vendors: They are responsible for construction, supply of materials, and meeting project deadlines.
- Architects and Consultants: They design and oversee the project’s execution, playing a critical role in its success.
- Joint Venture Partners: In many cases, projects are developed through collaborations between multiple companies that share profits.
Despite their significant roles and financial involvement, these entities are often shielded from accountability under RERA. If something goes wrong—like delays, quality issues, or financial irregularities—the burden falls squarely on the promoter, leaving other stakeholders off the hook.
Why Accountability Should Be Shared Among Stakeholders
1. Holistic Transparency
Each stakeholder plays a critical role in the project’s success. Financial institutions release funds, contractors ensure timely construction, and architects ensure the project adheres to design and quality standards. If any of these entities fails in their responsibility, it directly impacts the project and homebuyers.
Expanding RERA’s accountability framework to include these entities would create a system of checks and balances, ensuring transparency at all levels.
2. Preventing Mismanagement of Funds
Financial institutions often release funds to promoters in tranches, but there is little oversight on how these funds are used. By making financiers accountable, RERA can ensure that funds are spent only on the project and not diverted elsewhere.
3. Addressing Quality and Safety Issues
Contractors and vendors are responsible for construction quality. If poor-quality materials or substandard workmanship lead to structural defects, they should be held accountable alongside the promoter.
4. Protecting Homebuyers in Case of Insolvency
If the promoter declares bankruptcy or abandons the project, other stakeholders—such as financial institutions and joint venture partners—should step in to ensure the project’s completion. A shared accountability model would prevent homebuyers from bearing the brunt of such situations.
5. Encouraging Ethical Practices
When all stakeholders are held accountable, it reduces the chances of unethical practices like cost-cutting, delays, or fund diversion. This will improve trust in the real estate sector as a whole.
Proposed Reforms to Expand Accountability
1. Mandatory Stakeholder Disclosure
RERA should mandate that promoters disclose all stakeholders involved in the project, including their roles, financial involvement, and profit-sharing arrangements. This information should be available to homebuyers on the RERA portal.
2. Joint Liability Mechanism
Introduce a joint liability mechanism where all stakeholders, including financial institutions, contractors, and consultants, share responsibility for project completion, quality, and timely delivery.
3. Performance Guarantees from Stakeholders
Require all major stakeholders to provide performance guarantees. For example, contractors could provide a quality assurance bond, and financial institutions could commit to ensuring the availability of funds throughout the project lifecycle.
4. Independent Audits
Mandate regular independent audits of the project’s finances and progress, with reports submitted to RERA. These audits should evaluate the roles and performance of all stakeholders.
5. Dispute Resolution Involving All Parties
Create a dispute resolution framework that involves not just the promoter but all relevant stakeholders. This would ensure quicker resolution of issues like delays, quality defects, or financial mismanagement.
The Way Forward
For RERA to truly protect homebuyers and bring transparency to the real estate sector, it must go beyond holding only promoters accountable. A comprehensive accountability framework that includes all stakeholders will not only protect buyers but also elevate the real estate industry’s standards.
At myfloorarea.com, we believe in empowering homebuyers with information and insights to make informed decisions. As reforms in the real estate sector continue, we’ll keep you updated on the latest developments. If you’re considering investing in a property, make sure to do your due diligence and stay aware of the roles and responsibilities of all stakeholders involved.
