RERA is the Real Estate Regulation (and Development) Act, 2017 and many states have started notifying it. It is intended as a buyer-friendly measure and had been in the news for quite some time. A lot of home buyers and property dealers and carefully studying the act to what impact would it have on them. RERA is introduced to introduce some amount of consolidation in the real estate sector. But the act is not all about protecting the property buyers and some provisions in the act are also in the favour of the developers.
Earlier developers would put in huge sums of money in the advertisement to attract buyers but there was no way to ascertain as to who is honest and who is not. This often results in honest developers not getting enough visibility. This would not be a case under this act as developer information would be public and buyers can see beyond advertisements. For quite some years the real estate business was not picking up steam but with stricter provisions to complete work on time buyers are expected to come back into the market. Another unintended impact of RERA is increase in the cost of the property because it will get costlier for developers to comply with the act. Thus, the burden of this cost will shift to the buyer and hence the more money would be paid by prospective property buyers. Earlier refund in 60 days was a clause if the project was not completed on time but developers are not backs with instant liquidity and all their money goes into construction. In fact, there will be strict monitoring of money under the RERA Act through the escrow account and 70% of the buyer’s money will be put in these accounts which only be used for construction purposes. With the coming of the RERA Act, the prospects of small players are going to diminish as either they are going to merge or be taken over hence increasing the prices of real estate as there will be lesser competition.
Other significant changes that the act brings are the setting up of the regulatory bodies and appellate bodies to solve dispute between buyers and seller within 120 days. Strict regulations will be imposed on promoters to complete construction on time. Buyers will be only required to pay for the carpet area (area within the walls) and not for any super construction outside the walls. Developers and agents will have to get themselves registered with regulators and get all their projects registered which involve more than eight apartments.
It totality is a welcome act that benefits both the buyers and the sellers. Much, more importantly, it brings transparency to the market and hence gone are days when buyers would regret their real estate decisions. The real estate sector can now realise its full potential.
Keeping in mind the rapid growth process in the real estate sector and its contribution to Indian Economy the Government introduced the Real Estate Regulation Act (RERA). Their aim was to provide world-class facilities to its citizens by providing a home for all, developing smart cities and making advancements in the infrastructure sector.
The growth in real estate has been resulting in the increase of disposable incomes and hence, the market for real estate in the country. But with the continuous progress in this sector, the people (buyers) have been facing some issues when investing in the property due to the immoral and unethical practices across the country.
Issues such as lack of transparency and accountability of actions of developers affect buyers. Sometimes the problem is on the part of builders, but sometimes it is just due to the delays in the project approvals and dispute resolution that the demand of the buyers and industry is not fulfilled.
This issue called for a reform and supervised real estate sector. The government, therefore, started the process of Real Estate Regulation Act (RERA).
Commencement of Real Estate Regulation Act
The whole process of RERA began with the introduction of Real Estate Regulation Bill by United Progressive Alliance (UPA) in 2013.
- 9 September 2013 – the bill was referred to the standing committee on Urban Development for examination.
- 8 October 2013 – the standing committee heard the briefing of the Ministry of Housing and Urban Poverty Alleviation.
- 6 November 2013 to 12 December 2013 – the standing committee heard all the views of some of the NGOs working in the real estate sector.
- 12 February 2014 – after hearing all the parties and having public opinion the standing committee prepared its report
- 13 February 2014 – committee submitted
- 7 April 2015 – under the chairmanship of Prime Minister, Mr. Narendra Modi, the Union Cabinet gave its approval to the amendments in the Bill
- 6 May 2015 – the Bill was introduced in the Rajya Sabha and then directed it to the standing committee containing 21 members of Rajya Sabha.
- 3 July 2015 – the Select Committee held 17 sittings to examine the bill
- 30 July 2015 – the committee submitted its report to the Rajya Sabha
- 10 December 2015 – the Cabinet accepted 20 major amendments to the Bill
- 10 March 2016 – finally Rajya Sabha passed the bill
- 15 March 2016 – the Lok Sabha passed the Bill, and it received the assent of the President
- 1 May 2016 – the Real Estate Regulation (and Development) Act (RERA) came into force with 59 of 92 sections
- 1 May 2017 – the remaining provisions came into force
It took a little time for the Act to come into effect but once implemented, it can transform the look of Real Estate Sector in India. It is a reform in the real estate sector that will help the government to strengthen the Indian Economy as well as protect its citizens.
The Act covers a broad range of issues in real estate market such as the launch of a project to post sales problems of buildings, apartments, flats, plots, offices, shops and other such properties.
The Real Estate Regulation Act (RERA) 2016, which was announced by the government last year, finally came into effect on 1 May 2017 in the country. It was declared with the purpose of bringing transparency and accountability in the realty sector and ensuring the safety of the consumers from the developers. It is a very common practice where a consumer gets duped or cheated by the developers; cause a delay in delivering the property, or the developers don’t give the title of the deed to the owners.
Implementation of Real Estate Regulation Act
- The Ministry of HUPA (Housing and Urban Poverty Alleviation), to ensure the enforcement of the Act by 1 May, was notified a week ago so to formulate and announce rules for the functioning of the regulation.
- HUPA Ministry will formulate rules for UTs, but for Delhi, the rules will be set by Ministry of Urban Development.
- The Central and State Government will formulate rules under RERA within six months.
- Even though RERA is central law, the implementation of the Act will depend on the state government.
- To resolve the complaints of buyers and developers an authority – Real Estate Regulation Authority – will be established by both the Central and State Government within a year from 1 May.
- It will be required by the authority to give their decision within 60 days.
- The government can elect any officer as the interim Regulation Authority, awaiting the establishment of the authority.
Impact of RERA on Homebuyers
The government has always worked to protect and safeguard the rights of the citizens of the country. Therefore, to protect buyers from certain practices of developers RERA has been implemented. RERA will not only affect Buyers but the Builders and Developers also. Some of the factors that will buyers are:
- The customers who are to buy/ invest in an on-going project or in a project that is not registered as of now, they will be protected under RERA as all the terms related to the project will now be as per the Act.
- Even the pricing of the property are expected to be affected by RERA and GST, but it may take some (like 6 to 12 months) time to conclude.
- Until now the developers used to charge for super built-up area i.e. carpet area plus the thickness of outer walls and the balcony plus the proportionate area of common areas such as the lobby, stairs, etc. But now after implementation of RERA, the buyer only have to pay for carpet area i.e. area within the walls,
- The developer will be required to maintain a separate escrow account. He will have to transfer 70 percent of the money received from the buyers to the account. These funds can be withdrawn as per the stages of the construction and will have to be approved by engineers and chartered accountants of builders. This step is to prevent the developers from using the money raised for one project for another project.
- The developers will have to keep the buyers informed about the on-going project so as to provide clarity to them.