The Real estate segment in India is one of the most unregulated sectors in India. The irregularities in the segment had led to a lot of frauds and monopoly from the builder’s side. The buyers on the other hand often had been facing heavy losses in this sector for a long time. This has caused delays in the possession of the property, EMI and rental issues.
But this all changed when the real estate got its own regulator from May 1st 2017, the date in which the Real Estate Regulation and Developmental act became effective in the entire country. Each state and every Union territory will have its own regulatory authority which will frame regulation and rules according to the Act. The main reason RERA came into existence is to bring clarity and fair practices which would preserve and protect the interest of buyers. They will also impose penalties on errant builders.
What exactly does RERA do?
The real estate (Regulation and Development act) 2016, is an act of the parliament of India which seeks to protect the welfare of the home buyers as well as assisting in boosting of investment in the real estate industry. The bill was passed by the Rajya Sabha on March 10th 2016 and by the Lokh Sabha on 15th March 2016. This act was enforced from May 1st 2016.
Provisions under RERA
RERA has brought in much-needed relief to the first-time home buyers and builders as well. To safeguard the interest of the home buyers the following provisions are made in the RERA
The Real estate act is mandatory for all the commercial and residential properties where the land is over 500 square meters or having more than eight apartments to register with the Real Estate regulatory authority (RERA) for commencing any project. For on-going projects which have not received completion certificate on the date of commencement of the act will have to seek registration within three months. Failure to get registered will land a penalty of up to 10 percent of the project cost and three years’ imprisonment.
#2. Penalties and adjudication
As per the section 59 act, it is obligatory for the promoter to register the project with the authority and if the promoter fails to do the same, he shall be liable to penalties up to 10 percent of the estimated cost of the real estate project.
Why RERA is such a boon to the homebuyers?
#1. Projects get completed on time
The biggest problem faced by the buyers is the delay in the completion of the project. Over the past few years, many buyers weren’t able to receive the complete possession of their homes, even after paying their full amount to their owners. However, all this changed after the implementation of the act, under the new law, the promoter of a real estate firm has to maintain a separate escrow account for every project they are handling. About 70 percent of the money from investors and buyers would have to be deposited. This money should be used for the construction of the project and the cost of the land.
#2. Quality improvement in build quality
Poor quality of construction has been a constant complaint over the past few years. And RERA’s main concern is all about the quality of construction in the projects. Any issue highlighted by the buyers should be rectified by the buyer within a matter of 30 days.
#3. No charge for the area outside the wall
Until recently the real estate industry has been selling Real estate projects based on the Super built area. But now RERA stipulates the projects need to be sold based on the carpet area. As per the market trends, carpet area of a project generally includes 30 to 35 % lesser than that of the super built area of the project. Now as per the new rule, the builder can’t charge for this super built-up area.
#4. Pronounced transparency in deals
Unless the properties are registered with a regulatory authority, developers won’t have permission to advertise, sell or promote their respective housing properties. After the registration process gets completed, all the promotional activities which invite investment would have to bear their unique RERA registration number. To add further security to buyers, RERA mandates that the developers can’t ask for more than 10 % of the property costs as an advance payment option before signing a registered sale deed.
#5. Instant response to grievances
As per RERA’s act, the regulatory bodies and appellate tribunals have to be set up in each state to solver builder-buyer dispute within 120 days. Aside from the fact, that promoters will not have any permission to change a project’s design without the buyer’s consent. Promoters need to have the consent of almost two-thirds of the buyers in a project before further making any change in the number of units.
Overall RERA is an excellent scheme for rebuilding trust, imbibing transparency and safeguarding the consumer’s interest. RERA’s intention is loud and very clear. Their ultimate goal is to ensure that the homebuyer’s rights are protected and both the promoters and developers abide by the rules. This heralds a new era for enforcing buyer confidence and eradicating fraudulent developers.