The Real Estate (Regulation and Development) Act gave India’s real estate sector its first regulator from, May 1, 2016. It seeks to bring clarity and fair practice that would protect the interests of buyers and also impose penalties on errant builders.
RERA seeks to address issues like delay in possession, price issues, quality of construction, title, and other changes. Delay in projects is the most significant issues faced by buyers. Projects launched are often delayed due to several reasons. The reasons include deviation of funds to other projects, change in regulations by the authorities, the environment ministry, national green tribunal, involved in infrastructural development many places; the land acquisition becomes an issue, etc. Some builders often sell projects to investors without the approval of the plan or with poor quality of construction or unauthorized construction; such projects are often stuck in long litigation battles.
RERA establishes a state authority which will govern both residential and commercial real estate transactions. It ensures more clarity between the developers and buyers.
Homebuyers have been complaining fora long time about unbalanced real estate transactions heavily in favour of the developers. It aims to create a more impartial and equitable transaction between the seller and the buyer of properties. This Act mandates each state and union territory, to frame the rules which shall govern the functioning of the regulator.
Ongoing projects where the completion certificate or the occupancy certificate not been issued, are also required to comply with the registration requirements as per the Act. At the time of applying for registration, the promoters are required to provide in-depth information on the project, i.e., land status, details of the developer, promoter, approvals, schedule of completion, etc. Only when registration is completed, and other permissions related to construction are in place, then the project can be marketed.
One of the primary reasons for the delay of projects is that the funds collected from one project would invariably be diverted for funding different projects. To prevent such diversion, promoters are now required to deposit 70 percent of all project receivables into a separate account. These project receivable can only be used towards land and construction expenses and will be required to be certified by a professional.
Objectives of RERA
- To protect the interest of the customer in the real estate sector.
- To establish ways for a quick settlement of the dispute.
- Sale of the building, plot, an apartment to be transparent.
- To form the Appellate Tribunal to hear appeals.
RERA was established for enhancing accountability and transparency with respect to real estate transactions.
Following are the salient features of enacting RERA:
- All real estate projects should be registered under RERA.
- The registration of a particular project can be cancelled ifRERA authority receives any complaint to be true after an inquiry.
- A property cannot be sold if not registered with RERA.
- It is mandatory to upload the details of the project on the official website of RERA.
- If the buyer has any complaints against the builder regarding the violation of the provisions or rules of the RERA Act, they can file a complaint with the RERA authority.
- If any decision of RERA is not satisfactory, the aggrieved party can submit an appeal before the Appellate Tribunal.
Benefits of RERA Registration
- Prevention of Funds: RERA prevents insolvency by creating a separate Escrow account for borrowers related to all transactions of real estate.
- Authenticity: The Certification of RERA assures confirmation to the promoters and brokers as it will attract more buyers in the future.
- Complaints: The registered promoters and brokers are empowered to file a complaint with an appropriate authority.
- Flexibility: RERA makes it convenient for the promoters to choose the date of delivery of the project as per their wish.
- Professionalism: This Act is for strengthening the real estate industry as well as it helps in creating a sense of professionalism.
- Defined Carpet Area: Before enacting RERA, the method by which builders calculated the price of the project was not precisely defined. Whereas, RERA has defined the standard formula for calculating the carpet area, to avoid the promoters in providing inflated carpet areas to increase the prices.
- Penalty Interest: Prior to RERA, if promoters delay the possession, the interest paid by the builder was much lower than paid by the buyers for delay in payments. This has changed with RERA; now both the parties have to pay the same amount of interest to each other in case of a penalty.
- Defect in Title: If buyers discover that there is a defect in the title of the property, at the time of possession, the buyer can claim the compensation, and there will be no limit to the amount to be compensated.
- Payment in Advance: As per RERA rules, a builder cannot take more than 10% of the project cost from the buyer as advance fees. This helps the buyer to arrange for the next payment as per the payment schedule discussed between builder and him. It gives time to the buyer for sourcing the funds.
Real estate (regulation and development) Act, 2016 was implemented for better regulation of the real estate market. It stated that for better governance a real estate act was necessarily dealing with purchase, sale of land further pushing for a transparent dealing in land and other incidental requirements for such transaction between allotter and allottee. The Act specifically mentioned that the person to whom land is been sold should have clear detailed idea about the sanction plan, it was doubtful that person who administer the land as owner through power of attorney may not have the detail of sanction plan as the buyer of the land had or will have, so to make it more transparent it was suggested or is advised by the Act to upload the action plan, sanction plan and all other detail as suggested by the Act on website of the seller for public knowledge. In one of the recent rulings in the year 2018, under Ferani Hotels Pvt. Ltd. v/s The State Information Commissioner Greater Mumbai & Others said that “the fate of purchase of land development and investment is a matter of public knowledge and debate, any judicial pronouncement should squarely weigh full disclosure in this behalf. Further stating the court said any display of the action plan by the signboard or any other as stated in the act would not violate any provision under Right to Privacy, stating further the court stated that such display of information relating to land is not in nature of personal information against which contention can be tenable. It was advised that contrary to making it applicable to display sanction/ layout plan at the site land, to suggest a direction in which such information should be displayed resulting in hampering of any intelligent mischief born in the minds of culprit resulting in violation of the provisions of Act, objective enunciated was to provide a better governance and transparency in dealing and administering the land.