Status as on- 25/03/2023
The real estate industry in India is quite fragmented and chaotic with projects often notoriously delayed. Virtually any reason goes. Diversion of funds, lack of environmental approvals, failure of land acquisition, and directives from the National Green Tribunal have all contributed to frustrating delays. The homebuyer is often the person who has to bear the brunt of delays. RERA is seeking to change all that.
In 2016, the government enacted The Real Estate (Regulation and Development) Act, commonly known as RERA, which came to be implemented in May 2017 all over India. Its purpose is to encourage and develop the real estate sector while also protecting the interests of home buyers, bringing every activity of the buyer and the seller under one regulatory central and standardized legislation. RERA was established to do away with project delays, malpractice, and irregularities in norms and increase transparency and accountability from builders and homebuyers both.
Various states of India have been allowed to create their own regulatory practices in compliance with the Act. Maharashtra and Gujarat are considered the most RERA-compliant states and other states who have interim RERA are expected to follow suit. Let’s understand the highlights of the landmark act that has positioned the real estate sector on an upward trajectory, bringing in standardization that never before existed in India.
Salient features of RERA
- RERA is applicable and mandatory to all residential and commercial properties in all the states of India. All projects are required to be registered under RERA, whether they are in the launch or construction phase (provided the land is over 500 square meters or eight apartments).
- Any changes in the design or plan of the property have to be implemented after the permission of the (two-thirds of the) allottees and the authorities.
- The act lays down clear instructions about the carpet area (usable area within the walls). The buyer only pays for the carpet area and not the super built-up area.
- 70% of the funds acquired from the buyers are required to be kept in a separate bank account and utilized for the development of the project.
- The project completion date has to be clearly mentioned in the agreement and strict measures are implemented to have the project finished on time.
- All project details have to be made available to buyers other than the sale deed, including financial statements, registration copy, project prospectus, and design/plan of the flat, among others.
- RERA websites publish lists of developers and their ongoing projects (as well as complete project repertoire), including certificates, project litigation, FSI details, plot bearings, certifications, etc. in order to give buyers an in-depth look at the developer’s credibility and their projects.
- In case of any delay, both the parties (buyer and seller) will pay the same interest which is 2% above SBI’s Marginal Cost (of funds based) Lending rate.
- Each state is mandated to form a real estate appellate tribunal that is responsible to resolve disputes between buyers and sellers within a time period of 120 days.
- Builders are not allowed to demand more than 10% of the total cost of the property as an advance payment/booking amount before they sign the final sale agreement.
- If there are any malfunctions or defects in the building, the residents have one year to bring it to the notice of the builder who then is responsible to fix the problems within 5 years of possession, free of cost.
- The builder is not allowed to publish any advertisement related to the project unless he has registered the project with RERA (state or central RERA). Advertisements must mention the registration status and the details of the project are published on the RERA website as well.
- To file any complaints under RERA, you can visit the ‘Complaint Registration’ section on their website.
What documents are required for Registration under RERA?
Though each state maintains its own RERA website which specifies the documents required for registration under RERA. However, below commonly required documents are mentioned for project registration under RERA.
- Authenticated copy of the PAN Card.
- Photograph, contact details, address of the builder and partners, chairman, etc.
- Builder’s Income Tax Returns for the last three years and balance sheet.
- Legal title deed attested by an Advocate.
- In cases where the builder is not the land owner, any agreements made between the owner and the builder are done with the owner’s consent letter.
- Documents related to the project such as sanctioned plan/floor plans, proposed plan, parking area arrangements, carpet area, TDI/FSI details, proposed numbers of buildings/wings, and aggregate area of the open common spaces.
- Architecture and Design Standards, Type of Construction Technology, Earthquake Resistant Measures.
- Name and number of contractors, architects, engineers, and any other professionals involved in the construction.
- Details of the total duration of the project and completion date.
How a project can be registered under RERA by the builder?
Here it is mentioned point-wise to register a project by the builder under RERA–
- Fill out an application for registration along with the required documents and registration fees. The fee amount is calculated on the basis of project type and square meters (detailed fee structure is available on RERA websites). The RERA Maharashtra project registration fee is Rs.10 per square meter or a minimum of Rs. 50,000 only and a maximum of Rs.10,00,000 only.
- After the application, you will receive a RERA registration number, which is to be displayed in every advertisement of projects.
- The process of granting registration may take up to 30 days.
- The project can receive an extension in case of natural calamities or any other case if deemed reasonable by RERA (an extended period is usually one year).
- RERA holds the right to cancel the registration if the builder defaults, violates the laws, misrepresents facts, conducts unfair practices, or falsely advertises services.
What are the penalties imposed by RERA?
- Non-registration penalty is 10% of the estimated cost of the project. Further non-compliance with respect to registration may lead up to imprisonment for three years with or without a fine.
- False presentation of information is penalized at 5% of the total cost of the project.
- Non-compliance or contravention of any RERA order is calculated on the basis of defaulted days and may add up to 5% of the cost of the project.
- Not abiding by the decision of the appellate tribunal may lead to imprisonment of three years with or without a fine leading up to 5% of the total cost of the project.
How homebuyers can be benefitted from RERA?
- Homebuyers will get what they pay for in terms of carpet area. Earlier they used to be conned by false promises from builders who used to advertise higher carpet areas and then hide behind technical definitions.
- All the project details and progress reports will be made available to the buyers on RERA websites, making them aware of every aspect of the construction.
- There will be fewer projects being stalled, and more projects will be completed on time.
- The buying decisions will be faster. Dispute resolution will no longer be delayed for months or years, as the appellate tribunal will be responsible for a verdict in 120 days.
- Projects will not run out of funds as the builders will not be allowed to move funds from one project to another and maintain transparency about the fund allocation.
- Builders will be accountable for a botched job on the construction and will be held responsible to fix the problem for free.
- The government has decided to start a common online platform for RERA authorities of all states so that buyers can exchange views, seek advice and discuss their problems.
- Advertising and promotional materials will not contain any misleading information so the buyers will be well-informed about their prospective purchases.
- In case of default of payment by the buyer, the interest rate to be paid by the buyer to the builder was high, whereas if the builder delayed the project, the interest paid by him to the buyer was less. Now the same interest rates are applicable to both parties.
How builder can take advantage of the RERA?
- The buyers are expected to occupy the residence within 2 months of the Occupation Certificate. This is good news for builders as it reduces unoccupied properties.
- Lenders will be more willing to provide the flow of money to the builders due to renewed faith and transparency provided by RERA norms.
- RERA mandates regular payments from the buyers, including registration fees, maintenance charges, taxes, installment payments, water/electricity charges, etc. This is a relief to builders who often used to bear the brunt of defaulted payments quite often.
- The real estate sector will be more organized as there will be fewer fraudulent and unreliable builders who made the burgeoning sector otherwise unorganized. Such spring cleaning will increase buyer trust in the builders and the credibility of all registered developers will see an increase.
- There will be fewer incidents of insolvency, and bankruptcy in developers as 70% of the funds will be correctly engaged in the project and not moved around for other projects.
In all fairness, RERA has only been enacted a few years back, so its progress and outcome are still to be measured in its entirety. However, states that have shown compliance and quick implementation have already seen the initial fruits of accountability and stable growth and have also gained the trust of homebuyers. RERA not only benefits buyers massively, but it also provides strict and necessary guidelines for builders and real estate developers to contribute positively to the economic growth of the country.
Disclaimer: The above article is based on the personal interpretation of the related orders and laws. The readers are expected to take expert opinions before relying upon the article. For more information, please contact us at firstname.lastname@example.org.