The Real Estate (Regulation and Development) Act 2016, known as RERA too, was enacted on 26th March 2016 while all its provisions were effected from 1st May 2017. The Act has been brought in to protect the home buyer’s interests and bring about greater transparency in the real estate industry. Developers are required to register their projects under this act and Real Estate Agents have to register their businesses. The process of registration for real estate agents is currently on going while developers were given the deadline of 31st July 2017, failing with a 10% penalty will be slapped.
What is RERA?
Created with the basic intention of protecting the interests of home buyers and enhance investments in the real estate industry, RERA is an act passed by the Parliament of India. Its implementation is expected to bring a lot of relief to home buyers since the builder community will be accountable for any delays in the delivery of their projects. Unscrupulous players can now be expected to be weeded out and buyers will no longer be taken for a ride as every builder/developer will have to stick to the rules mentioned in RERA. It will end the agony the common man faced, when housing projects are inordinately delayed or when the builder gets by with low quality and shoddy construction work.
Why was RERA implemented?
Since a long time, home buyers have been at the receiving end as real estate transactions were designed to favour the developers, giving them a lopsided advantage. In order to create fairground for both the buyer and the seller, the government decided to bring in an equitable balance to the process with RERA acting as the first regulator of the real estate industry. RERA has enough teeth to simplify the purchase process and bring in better transparency and accountability, provided the various provisions remain undiluted when it comes to the state level. The RERA Act mandates every State and Union Territory to frame rules and create a regulator at this level.
RERA Rules Simplified and what do they mean for homebuyers?
- Under RERA, the builder is obligated to deposit 70% of the project fund in an ESCROW account and the withdrawal will be permitted at various stages of constructions, and will need approval from the Chartered Accountant and Structural engineers. This will ensure that the developers can use money allocated for a particular project without diverting it to other projects.
- The buyer will pay for the actual carpet area of the flat (area within the walls of the property) while the current practice allows the builder to charge for built-up and super built-up areas (common spaces included). RERA Act will bring an end to such practices which are detrimental for the buyer’s financial health.
- Developers will be allowed to begin sale of the property only after receiving the required clearances. Malpractices like selling a property before receiving all the clearances and hiding information from the buyer are also expected to stop with the implementation of this act.
- The builder will also have to provide a five-year warranty for structural defects in the building. However this rule needs clarity and a clear definition of structural defect to prevent its misuse and disputes at a later date.
- If a builder does not follow the delivery guidelines under RERA, he will have to pay fines and penalties. In case of delay in handing over possession of the property, the buyer is eligible to receive interest on the money paid, though this will vary from one state to another.
The RERA Act seeks to provide a standard and unified legal regime that remains similar across the country for the purchase of flats and apartments. The builder will be committed to the timelines promised by him and ensure inordinate delays are a thing of the past. This augurs well for the common man in the future as also promises a better quality of construction and building.