Decoding RERA as it turns 1
Date : June 21, 2018
Category : Uncategorized
Real Estate Regulatory Act, commonly known as RERA, was initially enacted on 26th March 2016. From 1st May, 2017 all its provisions came into effect and infused a fresh breath of air for home buyers across the country. With a clear cut intention of protecting the interests of home buyers from the malpractices of unfair builders while enhancing transparency in the real estate sector, RERA also aims to boost investments in the real estate sector.
Before the implementation of RERA thousands of home buyers filed complaints against their developers for malpractices. Real estate transactions were also heavily biased in favour of the developers. In a nutshell, developers played the real estate game on their own made-up terms. Coming to their rescue, RERA is acting like a bridge to create equitable and fair transactions between the seller and the buyer. As the first regulator in the Indian real estate industry, RERA is making buying property simpler by bringing in better accountability.
How RERA changed the real estate game
The introduction of RERA has brought in a wave of positivity into the real estate sector. Providing a unified legal regime, RERA is standardizing the purchase practices of apartments, flats, etc. across the country. The key highlights of RERA that matter the most are:
- It establishes a Real Estate Regulatory Authority in each state and UT. Working towards the protection of interests of the stakeholders, accumulating data at a designated depository and creating a robust grievance redressal system, it also aims to prevent time lags and makes it mandatory to dispose applications within 60 days max.
- It makes registration compulsory for any real estate project where the total area is more than 500 square meters with its respective state’s RERA. Promoters are required to provide detailed information about the project while applying for its registration. Once these details like land status, promoter information, approvals, schedule of completion, etc. are duly provided, then only the project can be marketed.
- It prevents diversion of funds from one project to another and requires promotors to park 70% of all project receivables into a separate reserve account. So the money can only be used towards the purchase of land and construction expenses. Also it makes sure that all the proceedings are looked after by a certified professional.
- It requires promoters to make continuous disclosures of the progress of the project on the RERA website. So home buyers can track the progress of the project through the periodic submissions made by the promoters.
- It requires a promoter to make a positive warranty on his right title and interest on the land. This warranty, if and when needed, can be used against him by the home buyer if any title defect is discovered. The promoter is also required to obtain insurance against the title and construction of the project.
- It requires the standardization of the sale agreement to be entered by promoters and home buyers. It also introduces some penal clauses that restrict promoters to insert punitive clauses against home buyers.
- It imposes a heavy monetary penalty (that may go up to 10% of the project cost) to ensure that the act is not violated. Depending up on the severity of the violation, imprisonment can also be prescribed in some scenarios.
Compliances benefitting the home buyers
Home buyers, with RERA coming into play, will get the compliance benefits they have always longed for. Some of the most important compliances are:
- Any minor addition or alteration will be informed about
- About any addition or alteration, prior consent of 2/3rd allottees is required
- Before registration with RERA no launch or advertisements are allowed
- To transfer majority rights to a 3rd party, consent of 2/3rd allottees is required
- Mandatory to share project plan, layout, government approvals, land title status and sub-contractors
- Timely completion of projects and delivery to the consumer is to be followed strictly
- Due to a defect liability period of five years, an increase in the quality of construction is required
- After majority of units have been sold, formation of RWA within specified time or 3 months is required
RERA is the act every home buyer was looking forward to. In just one year it has made a very positive impact on India’s real estate sector. And this is just the beginning. With time, this will only get better and home buyers will be able to get the most out of their hard earned money every time they invest in a property.