RERA (Real Estate Regulation Act) has finally become a reality. There’s anticipation. There’s excitement. There’s nervousness. There’s anxiety.
When the idea of RERA was first introduced, it brought in palpable relief for homebuyers. But it has become apparent that there are several issues with the regulation, which might force regulators to dilute its provisions. For the moment, it appears that implementing RERA in its entirety will be a process that might take some time. But there is no doubt that RERA will bring in a new era of transparency in the Indian realty market.
The real estate industry in India is quite fragmented and chaotic with projects often notoriously delayed. Virtually any reason goes. Diversion of funds, lack of environment approvals, failure of land acquisition, and directives from the national green tribunal have all contributed to frustrating delays. The homebuyer is often the person who has to bear the brunt of delays. RERA is seeking to change all that.
What is RERA?
RERA aims to lay down the ground rules for buying and selling of real estate in the country to ensure that projects are completed on time. We discuss some of these ground rules here:
- Under RERA, it is mandatory for developers to maintain a dedicated bank account for each project and deposit 70% of the advance amount collected from buyers of a particular project in this account. This ensures that the advance amount will be used only for the stipulated project.
- Builders must post details of all registered projects on the RERA website for easy access.
- These details must include original approved plans, plus any alternations; layout plan, approvals, land title status, details of promoters, contractors, architects, date of completion; details of financial statements, legal title deed, and supporting documents.
- Developers cannot make changes to the plan once sold without the written consent of the buyer.
- Real estate agents must register with their state regulator
- If a developer fails to meet delivery deadlines, they are liable to return the entire invested amount by the buyers along with interest rate as agreed in the contract.
- If a developer does not register his property, he will have to pay up to 10% of the project cost as penalty. Any violation of an order by the appellate tribunal of RERA will invite a jail term of a maximum of three years or more. Agents will face upto Rs 10,000 per day during the period of violation.
- Developers must first register their property with the regulator before they can advertise, sell or book any plot, apartment or building. All advertisements must carry their unique RERA registration number.
- If a buyer highlights any defects in quality of construction and after-sales service, the particular developer must rectify the same within 30 days.
Every State and Union Territory will have its own regulator and a set of rules to govern the regulator itself. While most states missed the May 1 deadline to establish their regulator, some that did meet the deadline have been accused of severely diluting the regulations.
As a customer, here are some important facts about RERA’s provisions that you must know:
- RERA provisions for the establishment of Real Estate Appellate Tribunals to handle property disputes, with the goal to deliver quick and unambiguous resolutions.
- For violation of the orders of Real Estate Appellate Tribunal, RERA stipulates the penalty to be payment of 10% of the project cost in case of developers and 10% of the cost of property purchased in case of allottees and agents.
- RERA provides for the establishment of an advisory body that will deal with issues related to government-sponsored real estate development.
- Under the new laws, developers are required to refund or pay compensation to the allottees for delay in projects with an interest rate of the State Bank of India’s highest marginal cost of lending rate plus 2% within 45 days of it becoming due. This would come to around 11% to 12%.
- Norms on size of projects to be registered with RERA has been made 500 sqm instead of 1,000 sqm. The law states that super built up area is no longer valid – properties have to be sold on clearly defined carpet area.
- Developers cannot discriminate on any grounds in the sale of properties. Any complaints in this regard should be resolved by adjudicating officers, real estate authorities, and Appellate Tribunals within 60 days.
- Developers must give buyers timely updates about their ongoing projects. In case of a project not receiving completion certificate, developers will have to disclose details of the amount collected from prospective buyers, timely updates on utilisation of funds, project timelines, and original sanctioned plans with specifications and later alterations as well as the expected time in which they will complete the project.
- RERA will publish on their website the profiles of promoters, details of any litigations, advertisements issued about the project, details of apartments, plots, registered agents, financial details of the promoters, status of approvals, and projects etc.
- RERA will encompass projects that are under construction on the date the Act becomes effective (i.e. May 1) and for which the Completion Certificate has not been issued.
- If a buyer brings any defect/fault in construction or after-sales services by the developer, the developer has to rectify within free of cost within five years.
