The Indian real estate industry, particularly the residential sector, was in the past correctly characterised as being unregulated and unorganised with unreasonable project delays and poor quality of construction.
The arrival of the Real Estate Regulatory Act (RERA) in March 2016 brought in a paradigm shift in the sector and metamorphosed it into a more mature, systematic, and regulated one. RERA came into force on May 1, 2017, and is meant to be a homebuyer-friendly regime, which will address grievances and promote transparency, efficiency, financial discipline, and accountability in the sector.
There are 14 important guidelines incorporated in the RERA umbrella to prevent unscrupulous players from raining on consumers’ homebuying plans:
Enforcing timely delivery of projects
In case of project delays, buyers have the right to –
(i) Seek withdrawal of the booking (the developer is liable to refund the entire amount along with interest)
(ii) Go ahead with the project (with the condition that the developer will pay interest for every month of delay until the property is ready for possession). The maximum time for refunding the buyer’s investment is within 45 days of it becoming due.
Facility to check RERA registration number
All builders have to mandatorily register their projects under RERA with the respective state regulatory authority and obtain a registration number for every project. Without RERA registration, developers are not allowed to sell the project.
The project details, construction progress, commencement/occupation and other certificates, sales details, etc. must be updated on the single-point information window i.e. RERA portal, at regular intervals.
Financial safety via an escrow account
Homebuyers’ investments can be considered safe, as RERA obliges developers to deposit at least 70% of the buyers’ money received for a particular project into an escrow account. This prevents developers from ‘rolling’ these funds into other projects. The rolling of funds was a major reason for project delays in the past.
Ability to verify the builder’s track record
Buyers can now opt for properties only from reputed developers who are complying with RERA norms and have a good track record and financial stability, which can be verified by buyers.
Transparency in advertisement and marketing collaterals
Developers can now promote a project only after registering it with RERA. The unique RERA registration number has to be published in every advertisement/brochure, or in any kind of project promotion.
Clarity on carpet area
The hitherto conventional practice of developers charging homebuyers on the basis of the super built-up area no longer works. Under RERA, the quoted price has to be mandatorily based on the carpet area of the property. What you see is what you get (and buy).
Strict norms on building changes
Around 2/3rd of the buyers’ consent in a particular project is necessary in case the developer intends to modify the building or layout plans/specifications/liabilities in the project.
Facility to check payment plans
Homebuyers can do due diligence before opting for a particular payment plan, a variety of which developers now offer – including flexi-payment, down-payment, possession-linked, and construction- linked plans.
Booking amount cannot exceed 10%
Developers can only take 10% of the total property cost as a booking amount while the sale agreement is drafted at later stages. RERA prohibits developers to accept more than this. If guilty of charging more than 10%, the developer potentially invites a penalty of imprisonment of up to three years.
Brokers must be registered under RERA, too
As service providers to real estate consumers, property brokers are also liable for all deliverables committed by the developers they represent. Hence, they must register themselves with their respective state Regulatory Authorities.
At long last, a reliable redressal mechanism
RERA provides a strong redressal mechanism to consumers by imposing a penalty on developers/brokers for any breach of obligation. Homebuyers can file complaints against developers/ brokers, which will be resolved in a span of 60 days from the date of the complaint.
Structural defects must be addressed
In case of issues within the building or apartment, such as inefficient plumbing, visible cracks, etc. in the initial five years after possession, developers are liable to rectify the defect in less than 30 days or else give compensation to the buyer.
Availability of land title documents
These vitally important documents were, more often than not, inaccessible to buyers before RERA. Now, they can scrutinize documents related to a project’s land title ownership on the RERA website.
Goodbye to soft/pre-launches
RERA has put a complete halt to soft launches, pre-launches and any other interpretations of selling something which doesn’t exist as yet. As a result, speculators have now been pushed out, and the market has turned extremely buyer-friendly.
Overall, RERA is a boon to homebuyers. While the progress of RERA implementation across states, barring a few, is going at a slower pace than predicted, it is definitely helping the real estate sector regain the trust of homebuyers by consolidating the sector and plucking out unscrupulous real estate players.
This article is contributed by Anuj Puri, Chairman, ANAROCK Property Consultants.
(The views expressed here are solely those of the author and do not necessarily represent or reflect the views of RoofandFloor.)
RERA is acting as a positive bridge between Developers and the customers. It is more customer-centric and protects their rights. Further, it also gives more confidence to the buyers as the developers are verified with the government and the rera keeps a strict vigil on their inflows and outflows.