Karnataka Assembly Election 2023: Real Estate Reforms Await the New Government

On May 13, as the votes are counted in the Karnataka assembly election 2023, the future ruling party or coalition for the state’s next five years will be determined. Whether it’s the Bharatiya Janata Party (BJP) or the Congress that assumes power, the legislators in the upcoming assembly will have to address crucial real estate issues.

Both major political parties, the BJP and the Congress, have made promises to tackle the challenges faced by homebuyers and tenants in the state, particularly in Bengaluru, if they come to power. They have pledged to amend the controversial Karnataka Apartment Ownership Act, 1972, in order to safeguard the rights of homebuyers.

The BJP’s commitment includes the establishment of a Karnataka Residents’ Welfare Consultative Committee to enhance the “ease of living” for homebuyers. This committee will review the Karnataka Apartment Ownership Act and propose further amendments. On the other hand, the Congress party has vowed to streamline the process of transferring land titles to homebuyers. However, the Janata Dal (Secular) has not made any promises regarding the real estate sector in the state.

Experts and residents of Bengaluru anticipate policy changes once the new government takes office. These changes are expected to address issues such as empowering regulatory bodies and regularizing unplanned development in the city.

One pressing matter is the need to streamline the functioning of the Karnataka Real Estate Regulatory Authority (KRERA). Despite its establishment in May 2017 to protect homebuyers and regulate the sector, inefficiencies persist, causing challenges for those who have invested in residential properties. One such challenge is the difficulty in obtaining refunds from builders who fail to deliver apartments on time. Although the regulator can issue a revenue recovery certificate (RRC) to initiate compensation or refunds for homebuyers, the process is often protracted.

According to Sudhakar Laxman, an investor in Bengaluru, the first notice to the developer was sent in 2022, a year after the RRC order was passed in 2021. Frustrated with the delays, Laxman and other homebuyers are planning to move the Karnataka High Court to expedite the refund process. As of June last year, only 12 percent of the RRC orders passed in the state resulted in successful recovery, according to a document reviewed by Moneycontrol.

Advocates suggest that policymakers should empower the KRERA by granting it additional powers and establishing a time limit for the process. They cite examples of other states like Uttar Pradesh, Maharashtra, and Bihar, where special powers have been granted to seize and auction assets of non-compliant builders. By implementing a standard operating procedure, the KRERA could have powers similar to those of civil procedure codes, allowing it to summon individuals, call witnesses, and issue arrest warrants. Advocates argue that these measures could expedite money recovery by at least 60 percent.

Another issue that requires attention is the removal of partial occupancy certificates from the Karnataka RERA rules, aligning them with the central Real Estate (Regulation and Development) Act of 2016. Presently, homebuyers cannot claim compensation for delays in residential projects that have obtained partial occupancy certificates. Dhananjaya Padmanabhachar, president of the Karnataka Home Buyers Forum, believes that removing these certificates would provide greater clarity and protection for homebuyers.

Additionally, the registration process for resident welfare associations (RWA) in Karnataka needs standardization. Currently, there are two separate laws for the registration of RWAs, creating a need for updates and harmonization. According to the RERA Act, once a development is completed, the builder must transfer the undivided share in the project to the RWA registered under the respective state’s laws. In Karnataka, RWAs are registered under the Karnataka Cooperative Societies Act, 1959, and the Karnataka Apartment Ownership Act, 1972. However, the state government has not yet notified the rules for the competent authority.

Legal experts argue that a significant policy change is necessary to standardize the bylaws and notify the Karnataka Apartment Ownership Act, 1972, for its competent authority. They also highlight the outdated nature of the Karnataka Cooperative Societies Act, 1959, and the need for revisions to address issues such as enabling online RWA polls. Although the state government introduced standard operating procedures for e-voting during the pandemic, these measures were temporary. Advocates believe that permanent solutions are required to modernize the registration process and ensure smooth functioning of RWAs.

Not only homebuyers but also tenants are seeking resolution to their problems from the newly elected MLAs. One prominent issue faced by tenants is the sudden increase in rents and exorbitant demands for security deposits. The current situation has worsened due to reverse migration and a significant gap between rental housing demand and supply. Prospective tenants are also subjected to scrutiny of their academic and professional records, with stringent criteria set by landlords, such as a minimum of 90 percent marks in class 12 or a robust LinkedIn profile.

Advocates point out that the state lacks policies to protect tenants and prevent arbitrary rental increases. Karnataka has yet to incorporate the Model Tenancy Act (MTA), which aims to regulate tenancy terms and conditions and bring transparency to the rental market. The MTA establishes Rent Authorities and Rent Courts to address grievances and resolve disputes. However, land and urban development fall under the purview of state subjects, and only a few states such as Andhra Pradesh, Tamil Nadu, Uttar Pradesh, and Assam have revised their tenancy laws in line with the MTA.

Amith Amarnath, an advocate, emphasizes the importance of notifying the Model Tenancy Act to regulate the rental market, particularly in Bengaluru. He highlights that the act caps rental deposits, thus protecting tenants and preventing sudden rental hikes. The Rent Authority established by the act would address disputes without burdening the civil courts.

As the election results unfold, homebuyers and tenants eagerly anticipate the new government’s initiatives to address these real estate issues. Streamlining the functioning of KRERA, standardizing association registrations, and incorporating the Model Tenancy Act are crucial steps toward ensuring the rights and protection of homebuyers and tenants in Karnataka.

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