Introduction of Self Regulatory Organisation (SRO) in Indian Real Estate Sector
- Sunday 30th May 2021
- Author: Riya Kapoor
SRO Members are regularly updating information of their projects on MahaRERA portal.
In order to ensure greater professionalism among promoters, bring a certain level of consistency in the practices of promoters, enforcement of code of conduct
In order to overcome the ignorance and resistance among promoters, MahaRERA undertook extensive awareness and capacity building initiatives. MahaRERA was also clear from the start of the journey that participation of promoters associations is important for success of this initiative. Hence promoter associations became essential partners in implementation of RERA.
One of the key mandates provided to promoter associations including CREDAI, MCHI and NAREDCO was to spread awareness among their members and handhold them on regular updating of information and compliance to RERA provisions. The promoter associations, in partnership with MahaRERA, undertook several workshops and handholding sessions across the state. These associations also established MahaRERA compliance teams that were focused on reaching out to its members and ensuring they update the information on MahaRERA portal in time.
This initiative was highly successful and members of these associations started regularly updating information of their projects on MahaRERA portal. Encouraged by the success of this initiative, MahaRERA also requested the promoter associations to reach out to other promoters, who are not their members. Accordingly, Promoter associations started reaching out to nonmember promoters to enhance their awareness and ensure updating of information on MahaRERA portal.
However, the non-member promoters were unresponsive to the promoter associations and questioned their authority.
In order to overcome this, Authority decided to introduce Self-Regulatory Organisations (SRO) concept in Real Estate Sector in Maharashtra.
International and National Examples of SRO
Self-Regulatory Organisations (SROs) are organizations representing a particular segment of entities, who set and enforce rules and standards relating to the conduct of members in the SRO, establishing industry standards, developing and applying codes of professional ethics and ensuring consumer confidence.
SROs are well – established mechanism internationally and nationally.
International SROs -
- United States: There are SROs in multiple industries including Real Estate, Financial Markets, Energy, Advertisement, Aviation among others -
- Australia: SROs are established in Health, advertising, financial services, pharmaceuticals among others
- Russia: In Russia, Starting with 2009, all Russian developers are required to join a Self-Regulating Organization (SRO) for construction, according to the law. SROs are Not-for-profit established under law for carrying out control over compliance of members of the SRO with requirements of standards and rules of Construction and considering issues of imposing of disciplinary actions on members
Even in India, Self-Regulation is now being used extensively in India also: - Under IBC, Insolvency and Bankruptcy Board of India (IBBI) have three Insolvency Professional Agencies (IPAs) which are the self-regulatory organisations that each Insolvency Professional is enrolled with.
RBI’s Malegam Committee Report had recommended formation of self - regulatory organisations (SRO) in the microfinance sector and accordingly RBI has established SRO for Micro finance sector.
SROs in Real Estate Sector in Maharashtra
With this background, In order to ensure greater professionalism among promoters, bring a certain level of consistency in the practices of promoters, enforcement of code of conduct and to discourage fraudulent promoters, MahaRERA introduced Self-Regulatory Organization (SROs) Concept in the real estate sector in Maharashtra. Before introducing the same, MahaRERA held numerous consultations with promoter associations to incorporate their suggestions.
The details of SRO system is as follows:
The basic eligibility criteria for Self-Regulatory Organizations (SRO) is as follows:
- The proposed SRO has to be a group / association / federation of promoters, which is a legal entity.
- The Proposed SRO should have atleast 500 MahaRERA registered projects of their members.
- Details of Membership fees, Duration of Membership, qualification of membership and code of conduct to be followed by the members may be decided by the respective SRO and shall be made available to their members.
Functions and Obligations of SRO
The Functions and obligations of the SRO are as follows:
- The SRO shall encourage its members to comply with the provisions of the Act, applicable rules, regulations, orders or circulars issued by the MahaRERA from time to time.
- The SRO shall be responsible for carrying out awareness and education activities among its members
- The SRO shall specify standard of conduct for its members and also shall be responsible for the implementation of the same by its members.
- Any information or particulars furnished to MahaRERA by the applicant shall not be false or misleading in any material respect.
Recognition of SRO
Any group or association or federation of promoters, which is desirous of being registered as a SRO with MahaRERA, may make an application to MahaRERA in Form A, accompanied by a fee of Rs.10000. The certificate of recognition of SRO shall be valid for a period of five years. However, MahaRERA may de-recognise any SRO if found to be in violation of the Real Estate (Regulation & Development) Act, 2016 or rules or regulations or orders made thereunder.
Participation in SRO
Going forward, each Promoter, applying for registration of his project in MahaRERA, have to be part of any one of the registered SROs. In due course, this concept of SRO would be extended to the Real Estate Agents too.
Through this initiative, the following impact shall be achieved:
- Minimum Government, Maximum Governance - SROs shall greatly increase the enforcement and compliance to RERA provisions by promoters through minimum intervention of Government. SROs, which is a body by the promoters, of the promoters and for the promoters shall carry the baton of governance and monitoring of promoter behaviour. This is true example of Minimum Government and Maximum Governance.
- Greater Acceptance - SRO mechanism shall help promoters internalize RERA principles and ethical behaviour since adoption of rules shall be based on social norms and conduct of peers rather than top-down prescriptive rules. This shall in still deeper respect and acceptance of the rules and result in better promoter behaviour, and avoid adversarial situations in which promoters try to find exceptions to externally imposed rules.
- Increased transparency and consumer confidence - One of the key responsibilities of the SROs shall be to ensure that all promoters are regularly updating the MahaRERA web portal on the status of their projects. This shall greatly increase transparency and consumer confidence in the real estate sector in Maharashtra.
- Faster implementation and Reduced regulatory costs - Through this initiative, we are leveraging the extended force of promoter associations across the state, to enhance compliance. This is speedy and cost effective method of increasing compliance in the sector. The cost of enforcement through SRO shall be less expensive than MahaRERA doing it entirely. Even from promoter’s perspective, the cost shall be lesser as they would be able to adopt the best practices earlier, rather than paying penalties and lawyer fees for late adoption.
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