What does coming into play of the Real Estate Regulatory and Authority (RERA) Act mean to you
A landmark development in the real estate sector came into effect on May 1, 2017, with the government calling it the beginning of a "new era". The ambitious move has finally given India’s real estate sector its first regulator. House purchase is one of the biggest financial decisions and spends by Indians, yet the sector was not under any regulations for years until a few days ago when the regulation came into effect.
What is Real Estate Regulation Act (RERA)?
The Real Estate (Regulation and Development) Act, 2016 (RERA) was passed by parliament in 2016 and the Union Ministry of Housing and Urban Poverty Alleviation had given time till May 1, 2017, to formulate and notify rules for the functioning of the regulator. RERA seeks to bring clarity and fair practices that would protect the interests of buyers and also impose penalties on errant builders.
According to RERA, each state and union territory will have its own set of rules to govern the functioning of the regulator. The central government has drafted the rules for union territories including the National Capital Territory. Some states like Haryana, Uttar Pradesh and Maharashtra have notified respective RERA rules and a regulator will soon start functioning there.
What will RERA do?
There are several issues that RERA proposes to address, such as delay in delivery of projects, price, construction quality, title of the property, among several other factors. Delays in projects are the biggest issue faced by buyers. The reasons include diversion of funds to other projects, changes in regulations by authorities, the environment ministry, national green tribunal and other bodies involved in infrastructure development and governing transport. Moreover, errant builders often sell projects without the approval of plan or with unauthorised increase in FAR, bad quality of construction or projects stuck in litigation.
With the Act in place, it will be mandatory for all existing projects to be registered with the state's regulatory authority by July 2017, and that no new project can be launched without registration, including clearances, site plans, advertisements and customer brochures thus helping buyers in making informed decisions before investing, and create a staunch benchmark for builders who don’t deliver according to promises made.
How will buyers benefit?
The regulator will ensure an umbrella to buyers in this matter for five years from the date of possession. If an issue is highlighted by a buyer in front of the regulator in this period including quality of construction and the provision of services, the developer will have to rectify the same within 30 days.
To ensure a tap on activities by developers, the Act prohibits builders from inviting, advertising, selling, offering, marketing or booking any plot, apartment, house, building, investment in projects, without first registering it with the regulatory authority.
Addressing the issue of delayed deliveries, the promoter shall have to return the entire money invested by the buyers along with the pre agreed interest rate mentioned in the contract based on the model contract given by RERA if they do not deliver within the stipulated time.
If the buyer chooses not to take the money back, the builder will have to pay monthly interest on each delay month to the buyer till they get delivery. Most importantly, RERA mandates that developers can’t ask more than 10 per cent of the property’s cost as an advanced payment or booking amount before actually signing a registered sale agreement.
With a regulator in place and more states likely to have a regulator soon, the real estate sector is likely to get more stringent and law-abiding than what it has been so far.
By Himali Patel and Rounak Kumar Gunjan