Homebuyers were earlier subjected to harassment by builders and developers. Homebuyers use to complain that real estate transactions were in favour of developers. Therefore, RERA became Indian real estate’s first regulator.
The main object of Real Estate (Regulation and Development) Act, 2016 (RERA) is to enhance transparency in the real estate related transactions by creating a organised and a uniform regulatory environment, thereby protecting the interest of customers or buyers and making real estate developers liable for timely completion of projects along with committed specifications, facilities and amenities.
How will RERA Help Buyers?
It helps buyers in the following aspects:
Separate Project Account
- The RERA Act makes it mandatory for the promoters to deposit 70 percent of the customer advances or project funds into a separate dedicated project account so that these funds are utilized for the acquisition of land as well construction of the related project.
- The withdrawals from the account need to be certified by the project engineer, architect, and chartered accountants and these accounts are to be audited every financial year and a copy of the same needs to be submitted to the authority.
- This mechanism ensures that the customer advances are not diverted towards other project development, and the promoters do not delay the project on account of lack of funds.
- In the case of non-compliance, the Act has stipulated high financial penalties, including promoters to compensate buyers for incorrect statement with a full rerun of the property cost with interest as well as the freezing of project account.
Registration of all projects
- To strengthen the buyer’s point of view, a larger emphasis has been laid on the transparency factor in the Act. The promoter is required to mandatorily register existing as well as a new project with authority before launching or advertising it (separate registration for different phases of the same project).
Disclosure and Transparency of Project Details
- In addition to the RERA Registration, the promoter is required to provide ‘full and true’ disclosure in terms of details of projects undertaken in the last 5 years with timelines and reasons for delay, copy of approvals and commencement certificates, sanctioned plans and layout, schedule of development works, proforma of the allotment letter, agreement for sale and conveyance deed, land title and construction insurance, carpet areas and the number of apartments booked.
- The promoter is also required to disclose names and addresses of real estate agents, contractors, architects, and structural engineers to bring greater transparency to all reality projects and protect buyers’ interests.
- In order to safeguard buyers from delay, the Act specifies that the promoter is required to provide a declaration supported by an affidavit stating that he has legal title to the land; that the land is free of all encumbrances; that the timelines will have adhered and that 70 percent of the customer advances will be deposited in the project account.
- The Act has made the promoter equally liable for the delay in handing over the project, thereby safeguarding the interest of the buyers and if there are any delays in the project, then the promoter will be liable to pay the prescribed interest/damages.
Selling Apartments on carpet Area Basis
- The Act has made it mandatory to sell the apartments only on the carpet-area basis and has put a stop on the current practice of selling on a full and super built-up area basis.
- The Act specifies that in the case of more than 5 percent decrease in the carpet area, the promoter has to refund prorated amount to the buyer; however, in the case of the increase in the carpet area, the buyer does not have to pay any additional amount to the promoter.
Developers are Prohibited from Making any Changes in the Sanctioned Plan
- It is observed that promoters undertake additions or alterations to the project without informing the buyers. To protect the buyers from this practice, the Act has spelled certain guidelines wherein in case of minor changes in design or structure, the same has to be authorized by the architect or engineer and has to be informed to the allottees.
- In the case of major changes in design or structure, the same has to be approved by all the allottees, who will be affected by the said change. In the case of any other changes, consent of 2/3rd allottees is required.
- A buyer can also file a complaint against the developer if he makes any additions and alterations in the sanctioned plans, layout plans, and specifications and the nature of fixtures, fittings, and amenities, etc. without the previous consent of at least two-thirds of the allottees, other than the promoter, who have agreed to take apartments in a building.
Developers liable for any structural defect
- If a customer or the buyer find any structural or workmanship defect within 5 years from the date of being handed over the flat, then the developer will have to rectify it without any further charges.
- If the developer fails to ratify the same, then the buyer has the right to complain against the developer to the RERA authority.
Anti-Discriminatory Clause to prevent consumer discrimination
- The developer is not to restrict sale by caste or community. If he does so, the buyer has the right to file a case against him to the RERA authority.
Penalty for project delays
- If a project gets delayed, then the developer will be liable to pay the monthly interest on bank loans taken for under-construction flats.
Buyers can claim possessions
- Possession of the flat or the units can be claimed by the buyers, and the association of buyers can collectively claim possession of the common areas as declared by the developer.
Promoters have to execute a registered conveyance deed
- The promoter has to execute a registered conveyance deed in favor of the buyer when sixty percent of the total number of purchasers in a building or a wing, has paid the full consideration to the promoter or within three months from the date of issue of occupancy certificate, whichever is earlier.
What are the benefits of RERA?
We have discussed how it will help buyers. Let’s now take a look at its benefits for not only buyers but also for developers and agents.
The benefits for buyers are as follows:
- Significant protection to buyers;
- Quality products and timely delivery of the project;
- Balanced agreements and treatments;
- Increase in transparency;
- Safety of money and transparency on its utilization.
The benefits for developers are as follows:
- Consolidation of sector;
- Corporate branding;
- Higher investment;
- Increase in organized funding;
- Increase efficiency.
The benefits for agents are as follows:
- Consolidation of sector with mandatory state registration;
- Increased transparency as well as efficiency;
- Less litigation by adopting best practices.
It may also be noted that under RERA appellate tribunals are set up so that the disputes between buyers and builders can be solved. It provides for resolution of disputes within prescribed time period.
Read our article:
Statutory Provisions of RERA: Registration Process, Documents, Offences, etc.