WHAT IS RERA ACT ? | Company Suggestion

what is RERA Act

RERA stands for Real Estate Regulatory Authority came into existence as per the Real Estate (Regulation and Development) Act, 2016 which aims to protect the home purchasers and also boosts the real estate investments. The bill of this Parliament of India Act was passed on 10 March 2016 by the Upper House (Rajya Sabha). The RERA Act was effective on and from 1 May 2016. At that time, out of 92 sections only 52 were notified. All the other provisions were effective on and from 1 May 2017.

RERA Act and Rules

The Real Estate (Regulation and Development) Act, 2016 under Section 84 envisions that within a period of six months from its commencement date, State Governments will set the rules to carry out the provisions associated with the Act.

On 31 October 2016, the centre, through HUPA (Housing & Urban Poverty Alleviation) Ministry, released the general rules of the Real Estate (Regulation and Development) Act, 2016.
All these rules are applicable to the Union Territories like Chandigarh, Lakshadweep, Daman & Diu, Dadra & Nagar Haveli and Andaman & Nicobar Islands.

Impact of RERA Act

After the Real Estate (Regulation and Development) Act, 2016 enforcement, registration of sale deed of a project unit cannot be done in the office of the sub-registrar without obtaining Occupancy Certificates or Completion Certificates. At present, unit registrations are taking place without checking. It is occurring without obtaining Occupancy Certificates or Completion Certificates. No one is bothered about the legal consequences. The Department of Stamps & Registrations know about the RERA Act implications but they have not taken necessary steps to stop the unlawful sale deed registrations of such properties. Below are the few impacts:

Fewer project will be launched as the promoters and builders will spend time to understand the impact of the Real Estate (Regulation and Development) Act, 2016. However, the honest promoters / builders / developers will benefit from this scenario as they will face lesser competition.
Dishonest builders will disappear as they will fail to sustain in the market after the RERA Act is implemented.
The 32 sections that have been added to the Real Estate (Regulation and Development) Act, 2016 will encourage a financial discipline in this sector.
After the Act implementation, the developers will have to follow several formalities if they wish to make certain changes to the project after its commencement. A short-term chaos might break out in the real estate industry but in the long run, it will boost the confidence of the customers and they will invest more.

Benefits of RERA

RERA has a number of benefits for the buyer, the promoter, and the real estate agent. These include:

Standardisation of carpet area: Before RERA the manner by which a builder calculated the price of a project wasn’t defined. However, with RERA there is now a standard formula that is used to calculate carpet area. This way, promoters cannot provide inflated carpet areas to increase prices.
Reducing the risk of insolvency of the builder: Most promoters and developers tend to have multiple projects being developed at the same time. Earlier, developers were allowed to move funds raised from one project to that of another. This is not possible with RERA since 70% of the funds raised need to be deposited in a separate bank account. These funds can be withdrawn only after certification by an engineer, a chartered accountant, and an architect.
Advance payment: As per the rules, a builder cannot take more than 10% of the cost of the project from the buyer as advance or application fees. This saves the buyer from having to source funds fast and having to pay a large amount.
Rights to the buyer in case of any defects: Within 5 years of possession, if there is any structural defects or problems in quality, the builder has to rectify these damages within 30 days at no cost to the buyer.
Interest to be paid in case of default: Prior to RERA, if the promoter delayed possession of the property, the interest paid to the buyer was much lower than if the buyer delayed payments to the promoter. This has changed with RERA and both parties have to pay the same amount of interest.
Buyer’s rights in case of false promises: If there is a mismatch in terms of what was promised by the builder and what has been delivered, the buyer is entitled to a full refund of the amount that was paid as advance. At times, the builder may have to provide interest on the amount as well.
If defect in title: If at the time of possession, the buyer discovers that there is a defect in the title of the property, the buyer can claim compensation from the promotor. There is no limit to this amount.
Right to information: The buyer has the right to know all the information about the project. This includes plans related to layout, execution, and completion status.
Grievance Redressal: If the buyer, the promoter, or the agent has any complaints with respect to the project, they can file a complaint with RERA. If they aren’t pleased with RERA’s decision, a complaint can also be filed with the Appellate Tribunal.

How to ensure that the Property is RERA Compliant?

Things that must be considered to understand if a property is RERA compliant are mentioned below:

If the area of the property is more than 500 square meters, the builders should register it under RERA Act before launching or advertising a project on that particular property.
Builders must provide proof that 70% of the total payment has been deposited by them into a discrete escrow account instead of using it for some other investment.
Builders must get all the necessary consents before advertising a new project. Discounts for early bird bookings and pre-launch offers will not be there anymore.

Concerns

Past real estate projects not included
- Only new projects are covered by the Act.
- Projects that are ongoing, completed or stuck due to clearance or financial issues, don’t come under this.
- Hence, many buyers will not be benefitted by it.
Delay from government agencies.
- There can be delays caused by the government, which sometimes takes a lot of time to clear a project.
- It is up to government bodies to timely approve projects, so that developers can launch, complete and deliver them on time.
No compulsory regulation for projects less than 500 square meter:
- Registration with the regulator will not be mandatory for projects less than 500 square meter.
- So, small developers will not be bound to register.
New project launches expected to be delayed:
- Because a project will not be allowed to launch without the requisite clearances from the government (which generally takes two to three years), projects will automatically get delayed.
It does not deal with the concerns of developers regarding force majeure (acts of god outside their control) which result in a shortage of labour or issues on account of there not being a central repository of land titles/deeds.
State governments regulated real estate before RERA as land and land improvement are in the State List of the Seventh Schedule of the Constitution. RERA has been enacted under Concurrent List. This has increased the tussle between various states and Centre over implementation of RERA.

Way Forward

Avoiding any conflict between the Centre and the States regarding regulation of real estate sector.
States should not dilute the RERA provisions. Provisions for punishment of violations, should be kept intact in all State laws.
States should fully implement RERA to curb black money
Issues regarding the implementation of RERA in North-Eastern States should be resolved to avoid any uncertainty in the housing sector in that region.
Government agencies should be made accountable for the delay in granting approvals.
A robust IT infrastructure should be established for monitoring projects and quick redressal of grievances.
All the concerns of developers should be addressed in a time-bound manner to avoid unnecessary litigations in courts.