10 things you should know about the new Real Estate Act [2016]

The newly enacted Real Estate (Regulation and Development) Act, 2016 (the “Act”), is a welcome and much awaited step towards transparency and effectiveness in the realty sector. The Act intends to regularize the real estate practice by setting up proper legal structure, imposing liabilities and obligations on the developers, in order to protect the interest of buyer’s rights and to bring accountability on the developers for both commercial and residential real estate projects. Here’s a synopsis:

  1. ESTABLISHMENT OF A REAL ESTATE REGULATORY AUTHORITY: The establishment of the Real Estate Regulatory Authority (RERA) under the Act will oversee the real estate transactions. RERA will provide speedy remedy to the customers in claiming their refund amount, compensation for the delay in construction, and will also monitor the legal compliance of the project.
  1. MANDATORY REGISTRATION OF PROJECTS AND REAL ESTATE AGENTS: All the real estate agents need to register themselves with RERA and their registration number will go into every sale that they facilitate. Similarly, it is mandate for the developers to register all the projects (which are on-going and completion certificate yet to be issued) with RERA before starting its advertisement. At the time of registration, the developer needs to submit details of the project such as names, status, number and type of apartments, number of garages, completion period, etc. Apart from this, the developer also needs to furnish various approvals, sanctioned plans, implementation schedule and specifications.
  1. DISPLAY OF A PROJECT’S INFORMATION ON RERA’s OFFICIAL WEBSITE: This in our opinion is the most important feature and most beneficial to the common man. By browsing the official website of RERA, all of the information related to the real-estate project such as its registration, statutory compliance, construction updates, etc. will be readily available, aimed at building confidence and to help buyers invest on the right project.
  1. MAINTAIN ESCROW ACCOUNT: With this Act, it is now mandatory for developers to deposit 70% of the amount raised from buyers into a separate bank account, before a developer can commence construction of the project for which these funds were collected. This provision of the Act is expected to prevent diversion of funds from one project to another leading to delay in project completion.
  1. NO CHANGE IN ARCHITECTURAL PLANS: The developer cannot modify any of the plan or other promised facilities without written approval from the buyer.
  1. MISLEADING OR GIVING WRONG INFORMATION: with regards to the project and its amenities, impose a 10% project cost as a penalty and up to 3 years of imprisonment to the developers.
  1. TIMELY COMPLETION OF PROJECT: As per the Act, a developer should follow strict regulations as outlined by RERA, to ensure timely construction. It further provides that customers are entitled to a full refund of the amount invested along with interest, if there has been a long delay in the delivery of the project.
  1. INTEREST RATE TO BE SAME IN CASE OF DEFAULT: The Act implements a fair practice of applying the same and monetarily equal penalty clause for both the parties. With this, the builder now has to pay the same penalty and interest rate for delay in completion of the project to the buyer, which the builder could have charged from the buyer in if the latter defaulted on their payment schedule.
  1. AFTER SALES SERVICE: The buyers can contact the developers to demand after-sales service in case there is any anomaly or deviation with the project. With this Act, the liability of the developers for structural defects is extended to five years from the date of handing over possession. The buyers are simply required to notify the builder of the deficiency and the builder is obliged to rectify within 30 days.
  1. OTHER RELEVANT PROVISIONS: The developer has to:
    1. Obtain occupancy certificate from the competent authority.
    2. Maintain the project till the time association is formed and takes over.
    3. Clear all dues, cess, taxes, charges or encumbrance, etc. related to the project before transferring the physical possession to the allottee.

RealDocs Team

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