Real Estate (Regulation and Development) Act (RERA) came into effect from May 01, 2017 and in a way ushered in a renaissance in the property sector of India.
RERA, now in effect since 1st May, 2017, is primed to usher in a new wave of clarity, fairness, and accountability into the Indian real-estate sector.
Results of this Act are slowly but surely trickling in, and the biggest beneficiary of this has been the common man.
So what was the need for the government to bring in such evolutionary measures into the real-estate sector? Let’s look at some of the major pain-points of an average home buyer:
- Typically, developers advertise & sell properties at the rate per square feet, but remain ambiguous on whether this is carpet area, walled, does it include common area, etc.
- Builders come up with a schedule of payments, but do not give an undertaking that these payments are being used exclusively for this project.
- The “penalty” that applies to a builder’s delay in handover, is comparatively minuscule when compared with the penalty that is levied by the builder when a buyer delay’s their payment.
- Even then, there is no redressal mechanism for the delay in property possession or for that matter complaint against sub-standard construction.
- Ambiguous or overbearing attitude when asked about project “status”. Even with smaller developers, be prepared to hear vague answers like “work is in progress, we will inform you soon”.
So how does the common man deal with the above?
Till now what buyers would do was get their lawyer send a legal notice to such defaulters, approach the consumer court, file a Civil Suit or lodge a Criminal Complaint as per the legal situation. Result? An endless wait.
LEGAL BENEFITS UNDER RERA
Seeing the above and more such cases, RERA was formulated to provide a “Speedy Redressal Mechanism”. The aim is to ensure that the common man/buyer is no longer misled by fancy advertisements or brochures, and TV commercials, and most importantly, is held accountable. Some of the ways RERA does this are:
- Refund & Compensation
A project delay commands a refund to the home buyer along with compensation. Also, a developer is liable to compensate the buyer for any loss or damage caused due to any incorrect/false statement made in the advertisement.
- Both Parties Pay Same Interest
Both the buyer and the project developer will have to pay the same interest on default, a penalty. And this interest rate has to be specifically mentioned in the sales agreement. Also, the interest rate cannot be different from the rates benchmarked by the SBI as its prime lending rate plus two percent at the time.
- Carpet Area Disclosure
The actual carpet area has to be legally disclosed to the consumer. After the enactment of RERA, a property developer cannot advertise or make a sale on the basis of any ambiguous data such as super built-up area.
- Project Details on RERA & Developer website
Every detail of the project must be made available for public view at the RERA website. It must match the details advertised anywhere else also. The builders must provide quarterly updates on project’s progress like number & type of apartments or plots booked, legal approvals on the project, status of the project, etc. In short, a buyer gets all updates pertaining to the property’s development.
- Buyers’ & RERA’s Consent before Project Modification
Under RERA, builders must take the written consent of the buyer before modifying a project. And this consent is a “must-obtain” from at least two-thirds of the owners, as well as RERA. The RERA will ensure that a written consent for modification comes after a nod from the project’s Architect, Chief Engineer and Chartered Accountant after completely checking the feasibility of the modified plan.
- Buyer’s & RERA’s Consent before Project Transfer
A developer cannot change hands on the project unless it has taken a written consent of two-thirds of the allottees as well as RERA.
- No diversion of Project Money
Seventy percent of the project money must be deposited in a separate bank account. The withdrawal can only be done to develop that particular project, and any withdrawals have to be proportionate to the percentage of project completion. Also, any withdrawal can only be made after written certificates from project’s Architect, Chief Engineer and Chartered Accountant are submitted. Further, the developer cannot demand more than 10 percent amount as an advance from buyers without a written sale agreement.
- Developer has to fix Structural Faults
Unlike before, the developer is now obligated and liable for fixing structural defects in the property for five years after the possession has been given to the buyer. Also, this repair work needs to be completed in accordance with RERA within 30 days of receiving a written complaint from the buyer.
- Follow RERA or Get Punished/Punishment for Offence
Developers [including real estate agents] have to register themselves under RERA. Non-compliance with RERA means either a hefty penalty or imprisonment up to three years.
So, how does RERA ensure that all claims stated above are not mere promises on paper?
LEGAL PROVISIONS UNDER RERA
- A complaint filed under clauses of Project Delay, Project Compliance, Refund etc before the Regulatory Authority (with a fee of Rs.1000/-) has to be disposed of within sixty days
- Filing of a petition before the Appellate Tribunal and in the High Court, within a period of sixty days from the date of communication of the decision or order of the Appellate Tribunal.
The intent of RERA is loud and clear:
- Bring back the faith of the common man in India’s most preferred investment vehicle – Property!
- Push accountability back onto the developer, regardless of their size and reach
- Quick and single redressal mechanism
In our previous series, we covered the RERA Rules framed by various States in India and highlighted the variations within various states. Read here:
RERA Rules- Real Insights by RealDocs : Part 1
RERA Rules- Real Insights by RealDocs : Part 2
RERA Rules- Real Insights by RealDocs : Part 3
RERA Rules- Real Insights by RealDocs : Part 4
If you are planning to buy a property sometime soon, RealDocs has created a mobile app that aims to help you determine what documents are required for a particular property based on the type of property, and most importantly, the applicable laws of your state. Feel free to download the RealDocs app from the Google Play Store, by clicking here.