What is the Real Estate Regulation Act (RERA)?
A lot of hue and cry on RERA has been made in news and media. Now, let us understand what exactly it is, and its real implications on builders and home or property buyers.
What is RERA?
Real Estate Regulation and Development Authority Act which is popularly known as RERA came into execution on 1st of May 2017. Last year in March, both houses (Rajyasabha and Loksabha) passed the bill and after various amendments to the regulation, the draft was formulated and subsequently implemented on May 1, 2017.
RERA is basically, formulated to protect or safeguard the interest of residential property buyers and to infuse accountability and transparency into the real estate sector, which is usually unregulated.
After the enactment of this stricter regulatory rule, all real estate sector builders and developers (mainly residential) have to upgrade and recalibrate their business practises accordingly.
What are the provisions included for registration of real estate projects?
As notified by the Government of India, the important key provisions of the Act are,
• It is mandatory for all residential and commercial real estate projects of larger than 500sq m or 8 apartments, to get registered with their respective state's RERA authority, before it is launched.
• The real estate agents, who are in purchase or sale of the reality projects, have to register themselves with the authority.
• The running projects which are without CC (Completion Certificates) will have to file for registration within 3 months of the commencement of the Act. Within 30 days, the authority will either accept or reject the application. After acceptance of the registration request the developers have to furnish all the relevant details about the project to the RERA's official website.
• If the body fails to register a project within the stipulated time, then the project will be penalised with 10% of the total project cost or the developer will face an imprisonment of up to 3 years.
How RERA promotes transparency in real estate sector?
RERA requires all builders to submit original and approved plans for their running / ongoing projects to the regulatory authority, including details of any subsequent modifications. In addition, they will have to provide details of the revenue collected from the buyers / successful tenderers and the utilization of the funds, together with the construction, completion and delivery deadlines certified by an engineer, architect or a certified CA.
In order to have all residential buyers to make an informed decisions, real estate regulatory authorities will need to ensure the publication / release of information regarding each builder's profile, litigation details, track record, advertisements and projects prospectus, plots and apartment details, information of Registered agents, promoters and consultants, layout plans, approval status, etc.
In addition to this, a maintenance of a separate Escrow account by the developer for each project which allows the use of (70% of )funds collected from a particular project to be used only in that same project.
What is a RERA compliant Project?
Every homebuyer or any realty sector buyer should know this before proceeding to make a deal.
• Before advertising and selling any project / property, it should have received all requisite approvals
• Details regarding to completion timeline, sanctions and master plans should be disclosed
• Each unit should be sold as per the carpet area and not as per the built-up area.
• It is important for promoter to have a separate Escrow account for each project and should maintain 70% of funds as advance deposits
RERA regime is going to have a far reaching effect on residential developers. It actually gives more importance to the realty customers and empowers them with legal rights to have more value for their money and investment. It also helps in building trust in the realty sector which ultimately leads to more strong economy.