What is RERA? (Real Estate Regulatory Act)
In order to facilitate transparency in real estate sector, protect the interest of home buyers and boost the investment in real estate sector RERA is come in to picture.
RERA (Real Estate Regulatory Act) 2016 is an act passed by Indian Parliament. Government of India has enacted the RERA Act 2016 after passing the bill through Lok sabha and Rajya sabha and it came into existence on 1st may 2016 with some of its sections and all the sections of the Act shall come into force with effect from May 1, 2017. Under this Act, Government of Maharashtra established Maharashtra Real Estate Regulatory Authority (MahaRERA), vide Notification No. 23 dated 8 March 2017, for regulation and promotion of real estate sector in the State of Maharashtra.
- Why RERA
People generally put in their life long savings to build a house. In past, the real estate market was dictated by terms and conditions formulated by the builders or promoters. For a long time, home buyers have complained that real estate transactions were heavily in favor of builders and developers. Top of it, for them, there were not any competent authority for registering their complains and for redressal of grievances. Buyers were taken for granted by builders and developers.
RERA (Real Estate Regulations Act) was introduced for protecting and safeguarding the interest of the property buyers. The intent was to ensure that property buyers were not exploited at the hands of the developers or builders. RERA is expected to make real estate purchase simpler, by bringing better accountability and transparency.
- Which project come under RERA
- Residential project, Commercial project and plotted development.
- Plotted development measuring more than 500 sq mts.
- Residential Projects with 8 units and more.
- Project without completion certificate before commencement of the act.
- Each phase of the project is to be treated as standalone real estate project requiring fresh registration.
- The Project only for purpose of renovation/ repair/ and redevelopment which don’t involve sales and marketing or new allotment of any apartment will not come under RERA
- Initial Impact of RERA on real estate industry
- Initial bottleneck
- Increased project cost
- Tight liquidity
- Rise in cost of capital
- Increase project launch time
10 Major Benefits of New RERA Act for Property Buyers
As per the provisions of the Act, all ongoing and upcoming projects must be registered with RERA mandatorily. All projects which are under process or which await issuance of completion certificate as on May 1st, 2019 would fall under the purview of this Real Estate Act. The benefits which would accrue to the property buyers due to implementation of the new provisions of this Act have been discussed below.
- Repercussions of defaulting
The Act subjects both the builder/developer and the buyer to the same rates of interest payable in case of defaults. If the buyer defaults in making timely payments or the builder defaults in handing over possession of the property on time, both of them would be liable to pay interest to the other party at the same rate of interest.
Before RERA came into the picture the buyer was liable to far higher rates in the event of delay of payments while the builder enjoyed delays in giving out possessions with minimal penalties.
- Transparency and complete knowledge about the property
This is one of the biggest advantages of RERA coming into picture. The developer is responsible for sharing all the relevant information with the buyers. These details would include:
- Plan layout
- Execution plan
- Stage wise completion status
- Status of competition
- Government approvals related information
- All the other important details
- Standardized definition of carpet area
Property prices are corresponding to their carpet areas. RERA has introduced a standardized definition of carpet area thereby eliminating chances of any manipulation on this front. In absence of any defined guidelines, developers and builders had devised their own mechanisms of measuring carpet area, and hence property valuations were inflated which used to act against the interest of property buyers. With standardizations coming in, builders will not be in a position to cheat innocent buyers.
- Ensures correct usage of funds and timely construction of properties
Before the RERA Act came into the picture, it was normal for developers to use funds raised for one project for another project as per their discretion. This used to result in funds deficit for completion of projects for which payments were actually received. The property buyers used to face harassment and delay in possession because the builders used to run short of funds and go paupers.
As per new RERA rules, a builder will have to keep 70% of the funds received for any project in a separate Escrow Account and the usage of these funds would be restricted for purposes of the property for which the payment has been made. This provision would ensure that funds raised for one project are not used in any other project by the builder and utilization of proceeds is made for the correct purpose only. This would also facilitate the timely completion of projects.
- Rules defined on advance payments
A builder cannot demand more than 10% of the total cost of the villa or apartment as application money or advance before an agreement for sale is entered into.
- Buyer entitlements in case of false commitments
In case there is a gap encountered between the commitments made by the builder with regard to the property and the actual delivery, the property buyer would be entitled to refund of full amount paid till that time. The buyer may also claim interest or compensation depending on the prevalent circumstances.
- Buyer entitlements in event of defect after possession
As per the provisions of this Act, the buyer would be entitled to rectification of defects free of cost if he encounters any of the below mentioned defects within a period of 5 years from the date of handover of possession.
- Structural defect
- Defect In workmanship
- Defect in quality, service or provision
Further such defects would have to be rectified within a period of 30 days once they are detected. The buyer can claim compensation if the builder fails to carry out the repairs properly within the stipulated time.
- Buyer entitlements in the event of delay of possession
In event of delay in handing over possession of a property at the due date, the buyer shall be in a position to exercise any of the below options.
He may decide to continue with the project till completion thereof. In such a scenario he would be entitled to interest from the due date of completion to the actual date of completion of the property. He would also be able to claim compensation from the developer.
- Buyer entitlements if there is defect in title
After possession, if the buyer detects that there is a defect in title of the property, he is in a position to claim compensation from the developer. This is not even “barred by limitation”, which would ideally mean no capping on the time frame within which such claim has to be made.
- Setting up an authority for getting grievances redressed
If property buyers have any grievances against the builder, they may approach the state authority which is set up under RERA. This is powerful body capable of taking actions and calls.However, the appeal would be heard only after deposition of,30% of the penalty Or a higher percentage as determined by the Appellate Tribunal. Or total amount to the allottee, including interest and compensation if any.
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