RERA: Everything you must know about the Real Estate Act
To regulate the real estate sector, the government has come up with
the idea of Real Estate Regulatory Authority (RERA) Bill which is expected
to help buyers. RERA is supposed to protect the interest of the homebuyer
and ensure timely delivery of projects. Real Estate Regulatory Authority (RERA)
Bill was introduced in 2013 and finally the bill got approved in March last year.
the idea of Real Estate Regulatory Authority (RERA) Bill which is expected
to help buyers. RERA is supposed to protect the interest of the homebuyer
and ensure timely delivery of projects. Real Estate Regulatory Authority (RERA)
Bill was introduced in 2013 and finally the bill got approved in March last year.
Although RERA is a central law, its implementation will depend on state governments,
as real estate is a state subject. Maharashtra government had approved the Real Estate
(Regulation and Development) Act (RERA) and it will come into effect from today 1st May 2017
as real estate is a state subject. Maharashtra government had approved the Real Estate
(Regulation and Development) Act (RERA) and it will come into effect from today 1st May 2017
The Real Estate (Regulation and
Development) Act, 2016 (RERA) will finally give India’s real estate sector its
first regulator from Monday, May 1, 2016. The act was passed by parliament last
year and the Union Ministry of Housing and Urban Poverty Alleviation had given
time till May 1, 2017, to formulate and notify rules for the functioning of the
regulator. RERA seeks to bring clarity and fair practices that would protect
the interests of buyers and also impose penalties on errant builders.
So
what is RERA? Here is a look at the real estate regulator and how it will
impact the real estate 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. While many states are
still behind on schedule for notification of RERA rules, many have notified
rules and a regulator will start functioning. Some of these states are Haryana,
Uttar Pradesh and Maharashtra.
Despite
seeing a slump in the past three years, the ticket prices are relatively high
and inventories are piling up. Low demand is also contributing to the reduced
recovery of investment by developers. These reasons have deterred developers
from reducing the ticket prices.
RERA
seeks to address issues like delays, price, quality of construction, title and
other changes.
Delays in projects are the biggest issue faced by buyers. The reasons are many and the impact is huge. Since the last 10 years, many projects have seen delays of up to 7 years. Projects launched after the turn of this decade have faced delays as well. Some have run into obstacles even before a brick was laid. 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 in FAR, bad quality of construction, projects stuck in litigation etc.
Delays in projects are the biggest issue faced by buyers. The reasons are many and the impact is huge. Since the last 10 years, many projects have seen delays of up to 7 years. Projects launched after the turn of this decade have faced delays as well. Some have run into obstacles even before a brick was laid. 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 in FAR, bad quality of construction, projects stuck in litigation etc.
Key
provisions of RERA
The
promoter of a real estate development firm has to maintain a separate escrow
account for each of their projects. A minimum 70 per cent of the money from
investors and buyers will have to be deposited. This money can only be used for
the construction of the project and the cost borne towards the land.
To
provide clarity to buyers, developers will have to keep them informed of their
other ongoing projects.
RERA
requires builders to submit the original 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 that will need to be
certified by an Engineer/Architect/practicing Chartered Accountant.
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.
RERA
talks about the quality of construction in projects. Over the last few years, buyers
have protested about poor of flats. The regulator will ensure protection to
buyers in this matter for five years from the date of possession. If any issue
is highlighted by buyers in front of the regulator in this period including in
quality of construction and the provision of services, the developer will have
to rectify the same in a matter of 30 days.
Developers
can’t invite, advertise, sell, offer, market or book any plot, apartment,
house, building, investment in projects, without first registering it with the
regulatory authority. Furthermore, after registration, all the advertisement
inviting investment will have to bear the unique RERA registration number. The
registration no. will be provided project-wise.
After
registering the project, developers will have to furnish details of their
financial statements, legal title deed and supporting documents.
If
the promoter defaults on delivery within the agreed deadline, they will be
required to return the entire money invested by the buyers along with the pre
agreed interest rate mentioned in the contract based on the model contract
given by RERA.
If
the 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.
After
developers register with the regulator, a page will be created for the builder
on the regulatory authority’s website. The developer will be given login
credentials using which it will upload all the information regarding the
registered projects on the regulator’s website. The number, type of apartments,
plots and projects and their completion status will be updated at a maximum
quarterly basis.
To
add further security to buyers, RERA mandates that developers can’t ask more
than 10 per cent of the property’s cost as an advanced payment booking amount
before actually signing a registered sale agreement.
The
regulator will have the power to fine and imprison errant builders based on a
case by case basis. The imprisonment can go up to a period of three years for a
project.