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 absence of authority and lack of proper rules and regulations in the real estate sector has always been a problem. The buyers have had problems such as the delay in possession, transfer of the deed or poor quality projects and much more and the builders are not held accountable for their actions or lack thereof.
The biggest harassment that a customer faces is a delay in possession of their property. Such a delay may extend to almost six years or more with no property in sight.
With the enforcement of RERA in India, the sector has now got its own Regulatory Authority. Each and every state and Union Territories will have its own Authority, and the aim of such authorities will be to frame rules and regulations as per the RERA.
To ensure the timely possession of the properties the Act has made some provisions. The developers will have to get registered their on-going projects that have not received a completion certificate. After the registration, they will have to follow all the rules and regulations of the Regulatory Authority.
Provisions in RERA
Some important rules in RERA will help prevent the developers from delaying the projects and stick to deadlines.
- The buyers will now get a legal declaration from the developers along with all the other required documents.
- The legal document will be supported by an affidavit that will state the period within which a phase or the project will be completed.
Specify the Possession Date:
- The developers will have to specify in agreement of sale – the date of possession and the rate of interest in case there is a delay.
- The period will be different for every builder. The buyer will have to sure if the time will suit him or not while investing in the project.
Clear title of the land:
- Most of the time the construction or delivery of the projects get delayed because of the land on which the development has to take place gets involved in disputes.
- The developers will now have to provide a written affidavit stating that the legal title to the land on which the project has to be built belongs to him.
- They will have to show the valid legal documents related to land and if another person owns the property then the authentication of the title.
Free from Liability:
- Sometimes the builder just can’t transfer the title to the buyer because of some liabilities.
- The developer will have to provide a written affidavit stating that the land is free from any liability.
Maintaining Separate Account:
- The developer will now have to maintain a separate account in a scheduled bank – an escrow account and 70 percent of the amount received from the buyers will be deposited in the account.
- The capital will be used to cover the cost of the land and the construction.
- They will be able to make withdrawals as per the work completed after it is certified by a chartered accountant, an architect, and an engineer.
- If the developers/builders abide by the rules of RERA in India, they will not only lose the registration of the project but will liable for the punishment.
- The punishment may vary – imprisonment for a term that may extend up to three years or fine that may extend up to ten percent of the estimated cost of the project, or both.