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.
The RERA Act short for Real Estate (Regulation and Development) Act, 2016 is one of the biggest improvisation in the sector of real estate. Real Estate Regulatory Authority (RERA) Bill was introduced by the Indian National Congress government in 2013 and after 6 years of debating, it was brought into effect on 1st May 2016. The rules under the act were to be formulated by the Central and State government within 6 months of the notification coming out, and each state had its own regulator along with a set of rules for the functioning of the regulator. RERA seeks to promote the interests of the consumers as well as builders and boost investments into real estate in an environment of trust and confidence. The transparency of the act ensures a steep drop in illicit activities and customer harassment, and inclusion of agents in the provision now makes them accountable for their actions.
Making it mandatory for all commercial and residential real estate projects to register with the Real Estate Regulatory Authority India, now disclosure of names of promoters, project layout, the status of statutory approvals, the draft of builder-buyer agreements, land status, names and addresses of real estate agents etc is obligatory. This information has to be regularly updated on the website of the regulator as well. Non-registration of any real estate project can also lead to punishment up to 3 years or a fine up to 10% of the cost of the project. Various provisions of the act help in protecting the uninformed customers, such as:
- The registration of the regulator can be revoked in case of any misleading or false representation, advertisements etc from his side.
- Non-delivery as per the terms of the contract would lead to a complete refund of the cost borne by the customer along with the pre-decided interest rate or pay monthly interest on each delay month to the buyer, if they refuse to take the sum altogether.
- The prescribed regulator will now have to give security as to the quality of construction and provision of services to the customer for 5 years from the date of possession and upon any such reporting of error, the developer will have to rectify it within 30 days of complaint.
- Before actually getting a registered sale agreement signed, the buyer cannot ask for more than 10% of the property’s cost as advanced payment.
All of these mandates increase the productivity and value of the real estate industry and set a benchmark for growth and development. The Act lays down that each state establish its own Appellate Tribunal that liberates the honest man and disciplines the swindlers.
However, the fly in the ointment is that project delays due to delays in obtaining completion certificates/essential connections from government agencies such as sanctioning authorities are uncatered for in the act.
Nonetheless, the act definitely makes this sector seem more organised and hopeful of immense prosperity and pellucidity.