RERA: Real Estate Regulatory Act- All You Need To Know

An Insight into RERA

RERA stands for Real Estate Regulatory Act. The bill was passed by the Rajya Sabha on 10th March 2016 and by the Lok Sabha on 15th March 2016. The Act came into force on 1st May 2016 with 59 of 92 sections notified. The Union Ministry of Housing and Urban Poverty Alleviation had given time till May 1st 2017, to formulate and notify rules for the functioning of the regulator and hence the remaining provisions came into force on 1st May 2017.

The aims of the Act are-

Protect the home buyers from unscrupulous builders.

Increase investment in the real estate industry.

To regulate the real estate sector of India.

Impose penalties on errant builders.

Bring transparency and accountability in the real estate industry.

Stabilise housing prices. It will lead to enhanced activity in the sector, leading to more housing units being supplied to the market.

According to RERA, each state and Union territory will have its own regulator and set of rules to govern the functioning of the regulator. Centre has drafted the rules for Union territories including the National Capital of the country. It will be the responsibility of each state regulator to register real estate projects and real estate agents operating in their state under RERA. The details of all registered projects will be put up on a website for public access.

The question most people are wondering about is whether the act will affect the prices of the property in any manner. Well, according to Pankaj Kapoor, MD, Liases Foras, "Property prices are not connected to RERA. It is determined by demand and supply in the market. Given the scenario right now, I do not think prices will see a correction after the implementation of RERA. However, margins are expected to increase because of a lower cost of construction and developers will be in a position to pass the benefits to customers."

Why RERA

RERA aims to address issues like delay in transfer of possession, dispute over prices, quality of construction and the construction material etc. Delay in projects is the biggest issue faced by the buyers. Since the last 10 years, many projects have seen delays of up to 7 years. The reasons include diversion of funds to other projects, changes in regulations by authorities, the environment ministry, national green tribunal etc and other bodies like those involved in infrastructure development and governing transport. In many places, land acquisition becomes an issue. Errant builders often sell projects to investors without the approval of plans, unauthorised increase, bad quality of construction, projects stuck in litigation etc. This is where the provisions of RERA come into the role of a saviour.

Moreover, the real estate sector of India is largely unregulated. If a consumer had a complaint against a developer they would have to make rounds of consumer or civil courts. Now, in the case of any grievance, the consumer can go to the real estate regulator for redressal.

In my opinion Real Estate (Regulation and Development) Act, 2016 (RERA) no doubt is the much-awaited legislation and will definitely bring transparency and accountability in the real estate sector but only time will tell how far the dispute resolution mechanism in RERA is going to be successful. Until that time aggrieved home buyers should consider approaching the NCDRC or other appropriate forums for redressal of their grievance. The answer to your dilemma- RERA Vs. NCDRC: Who Will You Approach? s just a click away.

With increasing fraudulent cases in the real estate market, it is best to make sure whether the buyers are entering into a contract with a credible builder or not. In addition, the piece of land in question may be under litigation. Hence, we recommend the buyers to carry out extensive builder verification; this could be done by verifying its past or current projects or even by posting queries on the various online real estate forums. Along with this one, there are 10 other must checks before buying a property.

Provisions Under RERA

Registration for Greater Transparency- The act makes it mandatory for all the commercial and the residential real estate projects where the land is over 500 square metres, or eight apartments, to register with the RERA for launching a project, in order to provide greater transparency in project marketing and execution. Also, this will reduce the number of real estate being used for illegal purposes.

The applications for registration must be either approved or rejected within a period of 30 days from the date of application by the RERA. If the registration is successful, the promoter of the project will be provided with a registration number, a login id and password for the applicants to fill up essential details on the website of the RERA. A tab will be kept on who is buying the house and what activities are being carried on. Developers cannot invite, advertise, sell, offer, market or book any plot, apartment, house, building, investment in projects, without first registering it with the regulatory authority. Thus, is another reason why builders will be keen on registering their projects. The number, type of apartments, plots and projects and their completion status will be updated at a maximum quarterly basis on the website.

If a person fails to register his project, a penalty of up to 10 percent of the project cost or three years' imprisonment may be imposed. Real estate agents who facilitate selling or purchase of properties must take prior registration from RERA. Such agents will be issued a single registration number for each State or Union Territory, which must be quoted by the agent in every sale facilitated by him.

Buyers will be Protected- To provide clarity to buyers, developers will have to keep them informed of their other ongoing projects. RERA requires builders to submit the originally approved plans for their ongoing projects and the alterations that they made later. They also have to furnish details of revenue collected from allottees, how the funds were utilised, the timeline for construction, completion, and delivery or transfer of possession of the home.

Also, the home buyers have been making complaints regarding the poor quality of material used in the construction. Under RERA, a five-year guarantee will be provided to the buyer by the builder. If, within the five-year period a buyer makes a complaint, it would have to be rectified by the builder within a period of 30 days.

RERA mandates that developers can’t ask more than 10 percent of the property’s cost as an advanced payment booking amount before actually signing a registered sale agreement.

Also, the buyer can contact the developer in writing within one year of taking possession to demand after sales service if any deficiency in the project is noticed.

Problem of Delay in Delivery Solved- Home buyers often complain about late delivery of the homes due to various factors such a litigation, land acquisition issues etc. However, under RERA the problem will be solved. If the builder fails to deliver within the specified time frame, he will be required to return the money invested by the buyers along with the pre-agreed interest rate mentioned in the contract. However, if a buyer chooses not to take the money back, the builder will have to pay monthly interest on each delay month to the buyer till they get delivery.

Escrow Account- RERA obliges the developer to park 70% of the project funds in a dedicated bank account. This will ensure that developers are not able to invest in numerous new projects with the proceeds of the booking money for one project, thus delaying completion and early handover to consumers. The developer will have to transfer 70 percent money received from home buyers to an escrow account. "This money will be withdrawn as per the stages of construction, approved by engineers and chartered accountants of builders. This will prevent developers from using the money raised for one project for any other project," Narendra Kumar, Advocate on Record, Supreme Court, said at a recent conference on 'Real Estate Sector Post Remonetisation & RERA,

RERA and Appellate Tribunal- The bill also proposes the establishment of authorities to be approached for redressal of grievances against any builder and also to regulate transactions related to both residential and commercial projects and ensure their timely completion and handover. Appellate Tribunals will now be required to adjudicate cases in 60 days as against the earlier provision of 90 days. Speedy disposal of cases and timely judgments will protect the buyers from unscrupulous builders and will also increase the investment in the real estate industry. Madhya Pradesh has a regulatory authority in place and other states such as Kerala, Mizoram, Rajasthan, Maharashtra etc. have an interim regulatory authority in place.

Pay Less for the Same House- The homebuyers will now have to pay less amount for the same house because one of the provisions of the act ensures that the homebuyers pay only for the carpet area, that is the area within the wall. The term “carpet area” has also been described under the act. This means that the builders cannot charge for the super built-up area, as is the practice at present, where you get 900-1,000 square feet carpet area if you book a 1,300 square feet house (the rest is balconies and common spaces). The new law is expected to stop this practice.

Buying a house is a tricky business and hence one should go through all the documents carefully before moving ahead with the purchase. Here is a list of the documents one must check before buying a house.

Discrimination is prohibited- No buyer can be rejected on the basis of caste, gender or religion. This will prevent the practice of building homes only for particular groups while rejecting others. If a buyer is rejected and discriminated against, it is a violation of his/her fundamental right to equality which is enshrined in Article 14 of the Indian constitution. Article 14 prohibits discrimination on the basis of caste, colour, creed, gender etc.

A Major Drawback of RERA

RERA is not as good as it sounds there is a fly in the ointment. Recent floods in Chennai and studies in various cities, especially Chennai and Bangalore, show that pressures on space have led to approvals for real estate projects in defiance of environmental objectives. Marshlands and lake beds have given way to apartment blocks. While these homes may be perfectly well-built and legal, how about roads, sewerage and drainage that are critical? As it turns out, even public health emergencies can result from short-sighted approvals. Perhaps the environment ministry and the housing ministry need to work together on this. Moreover, creating a concrete jungle and erasing the flora and fauna is not going to be beneficial for us in the long run. We need to devise a solution for development and environment protection to go hand in hand.

Last August, the environment and forest ministry finally approved a notification to define an ecologically-sensitive zone around Delhi’s Okhla bird sanctuary, giving a sense of relief to at least 90,000 home buyers in nearby Noida after the National Green Tribunal ordered that projects in a 10-km radius cannot be given completion certificates. More than 70,000 buyers were affected by two NGT orders that stopped construction, while another 20,000 home buyers could not take possession of completed homes. The National Green Tribunal was basing its views on wildlife regulations put in place more than a decade ago and a subsequent Supreme Court order, but flat buyers in many projects froze in their tracks. They would have never guessed the regulatory threats faced by their would-be homes.

Under the new realty Bill, an escrow account (a common parking place for funds) will be used to make sure that builders do not rob consumer to pay another or liberally use funds for speculation. While this will aid consumers, single-window clearances for projects, digitisation of records and grading of developers may help create a culture of quality in the sector.

Buyers delaying payments and builders delaying handover of properties did not share same penalties thus far. Now, they will be made equal. Consumer courts will now be able to hear real estate disputes. Builders, apart from disclosing various details on architecture and engineering, cannot change designs or plans without approval from consumers. But controversial environmental approvals may be a looming issue in future unless steps are clearly made – because the real estate industry is often treated in isolation from larger urban issues including traffic, cleanliness and provisions for water and clean air.

What People Think About RERA

CREDAI (Confederation of Real Estate Developers' Associations of India) chairman Getamber Anand said the association is pursuing the matter with the authorities. He said state government should act as a facilitator, which was the intention when they decided to implement RERA. Waiting for registration to start business activities is frustrating. He said even after RERA is formed, it will take at least a month in getting the registration number because of the huge wait list of registration seekers. Therefore, the government must suggest some way out.

Developers like RK Arora, who is CMD of Supertech, said that UP government should adopt the way RERA in Haryana is registering projects. In Haryana, final rules are yet to notify, but, the state RERA is registering projects having all the approvals with an undertaking from the developers that they would abide by the final rules when it is notified.

CMD of Express Builder Pankaj Goel said that any further slowdown would affect the cash flow of a project which would further delay the completion. This will, in turn, affect the customers only. “We want RERA to be implemented as soon as possible as it will help developers regaining credibility in the marketplace.'' It will further help in selling flats to end users, who would have an additional cushion of assurance of RERA of timely delivery.

If you still have a confusion do not worry because we bring the best of business, start-up and legal information to help you make smarter decisions. Lawyered.in also helps you find the perfect lawyer for your legal needs. Ask free questions, get fee estimates or book a free introductory meeting. Legal Solutions. Better. Easier. Faster.



For any Property Law related matter, please Post Your Requirement anonymously and get free proposals OR find the Best Property Law Lawyers and book a free appointment directly.