The Real Estate (Regulation & Development) Act, 2016 aims to establish the Real Estate Regulatory Authority that would regulate and promote the real estate sector. The body will –
- Ensure the sale of land or building or a project in an efficient and transparent manner
- Protect the interest of consumers
- Establish a mechanism to ensure speedy redressal of disputes
- Establish an Appellate Tribunal
- Cover both residential and commercial projects
The real estate and construction industry had widely welcomed the passage of Real Estate (Regulation & Development) Act, 2016. A brief look at the impact of RERA on the construction sector:
1. All new projects are required to be registered with the regulating authority. This will help provide greater transparency about the project for the customers. If a developer fails to register his property, he will have to pay up to 10% of the project cost as a penalty.
2. As per the new Act, developers cannot collect more than 10% of the value of the project in advance unless a sale deed has been executed.
3. Developers must adhere to sanctioned plan and specifications – For customers, this means that they can avoid delays in construction schedule due to the subsequent change in plan/layout made by the developers. Under the law, if there is a delay in completion, the developer is liable to pay the same interest as the EMI being paid by the customers back to the customer.
4. In case of any structural or other defects found within 5 years by the buyers, developers have to bear the responsibility of repairs. This will boost the demand for good quality of construction and buyers will have increased willingness to pay a good price for good quality buildings.
5. Developers have to put aside 70% of project funds in a dedicated escrow account linked to the project. This will act as an incentive for developers to use allocated funds for the specific project and prevent them from diverting the booking money to invest in other projects.
6. Norms on the size of projects to be registered with RERA has been made 500 sq.m. instead of 1,000 sq.m. The law states that super built-up area is no longer valid – properties have to be sold on clearly defined carpet area.
7. Other than developers, real estate agents must also register with their State RERA.
8. Developers have to post details like the project plan, layout plan, approvals, land title status, details of promoters, contractors, architects, date of completion with the State RERA – Customers can access this information from the RERA websites.
9. Any violation of an order by the RERA Appellate Tribunal will invite jail term of a maximum of 3 years or more. Real estate agents will face the penalty up to Rs 10,000 per day during the period of violation.
10. These measures will increase transparency during the funding phase which will invite increased foreign Investment.
11. Most importantly, as developers will be held accountable for details furnished, they will have to ensure that false promises are not made to homebuyers.
With the Act becoming law in 2016 and every state working to establish RERA, new launches of residential and commercial buildings will be regulated promising better times for homebuyers as well as the construction industry.