The Real Estate (Regulation and Development) Act (RERA) is India’s first real estate sector regulator. The parliament passed the act in 2015 and Union Ministry of Housing and Urban Poverty Alleviation gave time till May 1, 2017, to formulate and notify the rules for the smooth functioning of the regulator. Real Estate (Regulation and Development) Act (RERA) seeks to create fair practices and bring clarity to safeguard the interest of property buyers and also penalise defaulter builders.
What is RERA?
According to RERA, every state and Union territory will have its own regulatory authority and a set of rules to govern the functioning of regulator. Centre has mentioned the rules for Union territories including the National Capital Delhi. While many states are still behind the schedule for the notification of RERA rules, many have notified rules and the regulator has started functioning, these states are Haryana, Maharashtra and Uttar Pradesh.
Despite seeing a dip in last few years, the ticket prices are relatively very high and inventories are piling up. Low demand is also adding to the reduced recovery of capital by developers. This is the reason why developers are not reducing the ticket prices.
RERA addresses issues like delay in possession, high price, quality of construction, title and other changes.
Delay in projects is the biggest issue faced by the buyers. Reasons are many and impact is huge. Since the last decade, many projects have seen delays of 7-8 years. Projects launched after the turn of this decade have also faced delays. Some were into trouble even before getting started. The reasons were changes in regulations by authorities, diversion of funds to other projects, environment ministry, national green tribunal NGT etc and other reasons like bodies involved in governing transport and infrastructure development. In many projects, the issue of land acquisition creates problem. Builders often sell their projects to the investors even without the approval of plans, unauthorised FAR increase, bad construction quality, projects stuck in litigation etc.
Key provisions of RERA
Promoter of a real estate firm has to maintain a separate escrow account for each project. Minimum 70 per cent share of the money collected from buyers and investors will have to be deposited in that account. This money can be used only for the construction of that project and the cost borne towards land.
In order to provide clarity to buyers, developers will keep them informed about their other ongoing projects.
RERA wants builders to submit the originally approved plans of their ongoing projects and all the alterations they made later. Developer will also have to mention all the details of revenue collected from the allottees, how they utilised the funds, construction timeline for the project, completion of project, and delivery of the project certified by an Architect/Engineer/practicing Chartered Accountant.
It will be the sole responsibility of each state regulator to register all the real estate agents and real estate projects operating in their state under the RERA. All the details of these registered projects will be updated on a website for public access.
RERA also talks about the construction quality of projects. From last few years, buyers are protesting about poor construction quality of flats. The regulator has to ensure the protection of buyers in this matter for atleast five years from the date of possession. If the buyer highlights any issue in front of the regulator during this period including the construction quality and provision of services, the developer will have to rectify the issue in a given period of 30 days.
Developers are not supposed to advertise, invite, offer, sell, market or book any plot, house, apartment, building or investment in their projects without registering it with the regulatory authority first. After registration, all the offers and advertisement inviting the investment will have to bear unique RERA registration number. The registration number will be provided project-wise.
After the project is registered, the developers will have to give details of their financial statements, legal title deed and all the supporting documents.
If the promoter fails on delivery within the given deadline, they will have to return the entire amount invested by the buyers along with that they have to pay a pre agreed interest rate mentioned in contract based on the model contract provided by RERA.
If the buyer refuses to take the money back, the builder will pay monthly interest on each delayed month to the buyer till they get the possession of their flat.
As soon as the developers register with regulator, a page will be created for builder on regulator’s website. The developer will be provided login details using which it will upload all the info regarding registered projects on regulator’s website. The number of flats, type of apartments, plots, projects and the completion status of the project will be updated at maximum quarterly basis.
To add security for buyers, RERA makes it mandatory that developers can’t ask for more than 10% of property’s cost as advanced payment booking amount before signing an actual registered sale agreement.
Regulator will have the power to fine and imprison defaulter builders based on case by case basis. The imprisonment can be up to a period of three years per project.