Real Estate Regulation and Development Act
(RERA):
RERA is aimed at establishing real estate regulatory authority for
(a) regulating and promotion of the real estate sector,
(b) ensuring efficient and transparent transactions and
(c) establishing an adjudicating mechanism for speedy dispute
redressal, thereby protecting the interests of consumers.
It seeks to address vital issues of fair transactions, timely
delivery and quality construction.
In a landmark move, the central government, in the form of RERA,
gave the real estate sector its first regulator w.e.f from May 1, 2016.
The Union Ministry of Housing & Urban Poverty Alleviation, however,
gave time to states till May 1, 2017, to formulate & notify rules for the
functioning of the regulator.
Earlier, home buyers would fall prey to unscrupulous builders,
luring them to invest in unapproved projects, promising high returns. But now under
RERA, buyers interests are protected as only registered developers can launch
projects.
Moreover, developers cannot launch and advertise their projects
and seek customers' bookings, without getting all the required permissions from
the authorities.
They are also barred from arbitrarily charging the booking amount
as under the new regulation, booking amount has been fixed at 10 percent of the
property cost.
RERA has also made it mandatory for developers/project promoters
to make all necessary disclosures about projects including permissions secured
from authorities, date of launch, promised date of delivery, project
specifications, amenities/facilities etc. And all this information is to be
loaded on the project website by the builder. This information will also be
available on the website of development authority.
In
the light of these mandatory disclosures, consumers will be able to do proper
due diligence of properties and take informed decision about investing in a particular property, thereby ensuring the
safety of their investment.
Here, it is also significant to mention that regarding safety of
investment, RERA has made a stringent provision for developers to put 70
percent of the money collected from buyers (including land cost) in escrow
account, to ensure that this money is not diverted elsewhere and is actually
used for the project for which it is collected.
Today, if large number of under- construction residential projects
are stuck , it is for the reason that developers had over leveraged, diverted
money to other projects and even invested it in creating land banks.
And now
they are left with no money to complete these projects.
With the new real estate regulation, property buyers will also be
saved from being short changed in terms of the area of property.
RERA has put ban on selling property on the basis of super built
area, which has lot of ambiguity, with buyers being totally clueless about how
much space they're getting. Now, it has been made mandatory for developers to
sell property only on carpet area (actual usable area) basis, bringing
much needed clarity and transparency to buyers.
RERA will serve as a major deterrent against malpractices by
developers as it has put heavy cost (in terms of penalty and imprisonment) to cheating
by developers.
Under the new regulation, if the project promoter fails to deliver
home as per agreed deadline, they are bound to return the entire money invested
by the buyers along with pre- agreed interest rate mentioned in the contract.
But
if the buyer does not want to give up home, the builder will have to pay
interest on each delay month to the buyer till the final delivery of the
dwelling unit. Earlier, developers were paying meagre interest on delay in home
delivery while they were charging hefty interest from buyers in case they
defaulted on payments. But RERA will put an end to this malpractice.
Besides, delayed delivery, developers will be punished for other
violations, including poor quality of construction. Aggrieved buyers can get
redressal within 6 months through fast track court under RERA.
Notwithstanding the impending positive impact of RERA, concerns
have been raised about its efficacy with regard to timely and proper
implementation. A few states are yet to notify RERA and consumer groups are
expressing doubts about dilution of RERA provisions by some states. But the
government is committed to ensure that the act is implemented in its letter and
spirit.
It is in this context that the former urban development minister, M.
Venkaiah Naidu (responsible for pushing through RERA) stressed to the states to
notify the law in time and advised them against diluting it.
There is also a challenging task ahead- how to revive stalled
housing projects and ensure that buyers waiting for years, finally get their
home.
Industry experts believe that introduction of single window
clearance mechanism will give more teeth to RERA, to achieve its desired
results.
Some
of the major provisions of the Act, besides mandatory registration of projects
and Real Estate Agents include:
1.Depositing 70% of the funds
collected from buyers in a separate bank account in case of new projects and
70% of unused funds in case of ongoing projects;
2. Projects with plot size of
minimum 500 sq.mt or 8 apartments shall be registered with Regulatory
Authorities;
3.Both developers and buyers to pay the same penal interest of
SBI’s Marginal Cost of Lending Rate plus 2% in case of delays;
4.Liability of
developers for structural defects for five years; and
5. Imprisonment of up to
three years for developers and up to one year in case of agents and buyers for
violation of orders of Appellate Tribunals and Regulatory Authorities.
Real Estate Regulatory Authority:
The absence of a proper regulator (like the Securities Exchange
Board of India for the capital markets) in the real estate sector, was long
felt. The Act establishes Real Estate Regulatory Authority in each state and
union territory. Its functions include protection of the interests of the
stakeholders, accumulating data at a designated repository and creating a
robust grievance redressal system. To prevent time lags, the authority has been
mandated to dispose applications within a maximum period of 60 days; and the
same may be extended only if a reason is recorded for the delay.
Real Estate Apellate Tribunal:
With the advent of RERA, specialised forums such as the State Real
Estate Regulatory Authority and the Real Estate Appellate Tribunal, will be
established for the resolution of disputes pertaining to home buying and the
aggrieved party will have no recourse to other consumer forums and civil
courts, on such matters. While the RERA sets the groundwork for fast-tracking
dispute resolution, the litmus test for its success, will depend on the timely
setting up of these new dispute resolution bodies and how these disputes are
resolved expeditiously with a degree of finality.
Carpet Area:
The area of a property is often calculated in three different ways
– carpet area, built-up area and super built-up area. Hence, when it comes to
buying a property, this can leads to a lot of disconnect, between what you pay
and what you actually get.
According to the RERA, carpet area is defined as ‘the net usable
floor area of an apartment, excluding the area covered by the external walls,
areas under services shafts, exclusive balcony or verandah area and exclusive
open terrace area, but includes the area covered by the internal partition
walls of the apartment’.
As
per the RERA guidelines, a builder must disclose the exact carpet area, so that
a customer knows what he is paying for.
However, the act does not make it mandatory for the builders, to
sell a flat on the basis of carpet area.”
Projects Under RERA:
Commercial and
residential projects including plotted development.
Projects measuring more
than 500 sq mts or 8 units.
Projects without
Completion Certificate, before commencement of the Act.
The project is only for
the purpose of renovation / repair / re-development which does not involve
re-allotment and marketing, advertising, selling or new allotment of any
apartments, plot or building in the real estate project, will not come under
RERA.
Each phase is to be treated as standalone real estate project
requiring fresh registration.
The regulation has come as a big relief in the backdrop of lakhs
of aggrieved home buyers across India protesting against long delays in
delivering their homes in which they have invested their hard earned money.
Model Question:
RERA
(Real estate regulation and development Act) is described as a potential tool
for revamping the real estate sector across the board, from developer to end
users and investors, to lending institutions and a decisive step to usher the
real estate sector into transparency and accountability in turn bringing in
much needed consumer protection. Explain the provisions in RERA which protects
the interests of home buyers.