RERA - REAL ESTATE REGULATION AND DEVELOPMENT ACT
The Real Estate Regulation and Development Act is an act that enacted by the government of India on March 26th 2016 and all its provisions came into force, from May 1st 2017. It intends to protect the interest of home buyers and to infuse transparency in real estate sector.
The main aim of RERA is to create a more equitable & fair transaction, and less fraudulent between the seller and the buyer of properties, especially in the real estate market. RERA will make property purchase simpler and effortless by bringing in better accountability and transparency. It makes compulsory for each state and union territory to form its own regulator and frame the rules that will govern the functioning of the regulator.
The key provisions included in the Act, notified by the Government of India are mentioned below.
- The act mandates all residential and commercial real estate projects (new or on-going) larger than 500 sqm or eight apartments, to be registered with respective state’s regulatory authority.
- On-going projects without Completion Certificates (CC), as on the date of commencement of the Act, will have to file for registration within three months. The authority will have to either accept or reject the application within 30 days. Post acceptance of the registration request, the promoters will be required to submit all the relevant details about the project on RERA’s official website.
- The failure to register a project would attract a penalty of 10 percent of the total project cost or an imprisonment of up to three years.
- Real estate agents, facilitating the sale or purchase of realty projects, too, will have to register themselves with the authority.
TRANSPARENCY OF RERA IN REAL ESTATE INDUSTRY:
RERA mandates all builders to submit the original, approved plans of their on-going projects to the regulatory authority, including the details about the alterations made later. In addition, they will have to furnish details of revenue collected from allottees and utilization of funds, along with and construction, completion and delivery timelines certified by an authorized engineer, architect or a practicing chartered accountant.
Moreover, in order to enable homebuyers to make informed decisions, the real estate regulatory authorities will have to ensure publication of information relating to each builder’s profile, track record, litigation details, advertisements and prospectus of their projects, details of plots and apartments, details of registered agents, consultants and promoters, status of approvals, layout plans etc.
PROJECTS UNDER RERA:
- Commercial and residential projects including plot under development.
- Projects measuring more than 500 sqm or 8 units.
- Projects without Completion Certificate, before the commencement of the Act.
- The project is only for the purpose of renovation/repair / re-development which does not involve re-allotment and marketing, advertising, selling or new allotment of any apartments, plot or building in the real estate project, will not come under RERA.
- Each phase is to be treated as a standalone real estate project requiring fresh registration.
IMPACT OF RERA ON HOME BUYERS:
Some important impacts of RERA on Home Buyers are mentioned below.
- The RERA act warrants showing complete transparency from the developers of all the projects. The builder has to disclose all the details pertaining to the property such as project plan, approvals, layouts, contractors, FSI and all other things related to the project.
- Liability is one of the major benefits to the buyers.
- RERA insists that all the property developers must give now rates in terms of carpet area. There will be no space for the built-up area or super built up anymore and the buyer will have clear status as to what they are getting in name of space for which they are paying.
- RERA also tackles the most crucial part and that is Real Estate Agents. Today we can find in every nook and corner a real estate agent working in a very informal way, they do not have any official number or ID and no such registration hence there are no implications of any barriers or fraudulent activity.
- RERA proposes each and every single broker to get register which will make easy for buyers to track their records verify them and add a level of security.
- Builders can’t delay your projects. Scores reveal that there has been a trend for not delivering the projects on time. But now no developer can do this under the law they need to pay an interest rate of 2% points above the banks to the home buyers.
- Builders cannot charge extra.
- Builders are responsible for any defect in the new construction.
- Security to buyers will be ensured by opening an escrow account where the developer will transfer 70% of the funds received for that particular project. He cannot rotate that money anywhere else and the money can be withdrawn as per the stages of the construction.
- Also, RERA has changed the definition from 1000 sqm to 500 sqm or a total of 8 flats of the bare minimum for regulatory coverage.
This RERA act will provide security to buyers with a unified code for purchase of Flats, Apartments, Villas, Plots & etc.
RERA COMPLIANT PROJECT:
- A project should have received all requisite approvals before being advertised or sold.
- Information pertinent to sanctions, completion timeline and master plan should be disclosed.
- A separate escrow account for each project should be maintained with 70 percent of funds as advance deposits.
- Each unit should be sold as per the carpet area instead of built-up area.
The promoter/developer of a real estate development firm will have to maintain a separate escrow account for each project. A minimum of 70 percent of the total funds collected for a specific project will have to be deposited in that account and used only for the construction or land cost pertaining to the same project.
At the same time, Home buyers can monitor the progress of the project which will be updated on the RERA website, since it is mandatory for the promoters/developers to provide updates of the project periodically.
NON-COMPLIANCE WITH RERA:
Non-compliance with RERA rules will have to pay penalties for all stakeholders including developers, promoters, agents, and buyers.
- The builder/promoter will be liable to a penalty of 10 percent of the estimated cost of the project if they fail to register as per the Act. A continued violation can attract an imprisonment of up to three years or both.
- The RERA holds the right to revoke the registration of a project, builder, promoter or agent if they default in keeping with the rules of the Act, violates any of the terms and conditions of approval given by the competent authority, or is involved in any kind of unfair trade practice. Registration of either of the parties or the entire project will be revoked only after giving a one-month prior notice.
- The promoter and agent will be slapped a penalty of five percent of the project cost in case they provide any false information or contravene any provisions of the Act. Failure to comply with the orders of the Appellate Tribunal would increase the penalty to 10 percent of the project cost and may even lead to an imprisonment of up to one year.
- The allottees, too, will be liable to a penalty of five percent of the cost of apartment/property, if they fail to comply with or contravene any orders, decisions or directions of the Authority. The penalty can go up to 10 percent of the cost of apartment/property or lead to an imprisonment of up to one year in case of noncompliance with the orders or decisions of the Appellate Tribunal.
The Real Estate Regulatory Act is one robust step towards regulating the highly unregulated real estate sector and bringing more transparency to real estate transactions. With a clear intention of protecting the interests of buyers, the Act helps the consumers to safeguard themselves from any foul play or exploitation by promoters.