Real Estate (Regulation and Development) Act, 2016 (hereinafter: RERA) came into effect in 2017. It protects homebuyers while also augments in the growth of real estate investments by introducing efficiency and transparency to the real estate sale and purchase process. The Act creates a Real Estate Regulatory Authority in each state to regulate the real estate sector and serve as an adjudicating authority for quick resolution of disputes.
OBJECTIVE AND NEED FOR RERA:
This sector is generally unregulated, with no industry-wide standardisation of business methods and transactions. Furthermore, the prevalence of difficulties such as delays and building quality constructions had been a major problem plaguing the sector, resulting in massive cost overruns owing to delays. There have been countless cases of developers defrauding property buyers for which there was no legal recourse. All of these circumstances contributed to a large amount of black money being generated in the sector.
As a result, RERA was enacted to improve transparency and accountability in real estate and housing transactions, thereby attracting both domestic and foreign investment. It also attempted to provide a consistent regulatory environment to facilitate quick dispute resolution and encourage orderly growth through efficient project execution and standardisation. It aimed to empower and safeguard home buyers’ rights by providing a single-window clearance mechanism for real estate developments. After understating the objective of the Act, it is also pertinent that we discuss the key provisions of the Act.
KEY PROVISIONS OF RERA:
- Developers frequently make misleading promises about project completion dates and rarely follow through. Therefore, under Section 18 of RERA, if the builder fails to deliver the flat on schedule, the buyer will be entitled to a refund plus interest.
- Developers employ pre-launch deals to acquire revenue, which they then use to buy more land or invest in additional projects. To combat this, Section 4 of RERA mandates the creation of a separate bank account for each project, the recording of all transactions, and the prohibition of diversion to another project. To deposit 70% of the funds collected from buyers in a separate escrow bank account just for the construction of the project is mandated as per this provision.
- As per Section 14 of RERA, it is the developer’s liability to repair structural defects for five years if the buyer finds any structural deficiency in the development of the building without any extra charges.
- As per Section 13 of RERA, a promoter cannot accept more than 10% of the cost of the plot, apartment or building as an advance payment or an application fee from a person without first entering into an agreement for sale.
- As per the interpretation of Section 3 of RERA, it is mandatory to register all projects with plot size of minimum 500 sq.mt or eight apartments with Regulatory Authorities.
- In order to maintain the process transparent, promoters must make periodic submissions to the regulator regarding the project’s development, as required by Section 34 of RERA. Home buyers can now track the progress of the project on RERA’s official website.
- During the construction phase, builders market their homes by describing the numerous facilities and features that will be included, but not everything goes according to plan, with several items missing. According to RERA, no alterations to a plan are permitted, and if a builder is found guilty, they will be fined 10% of the project’s expenses or face up to 3 years in prison.
- Carpet Area is defined by RERA as the net useable floor area of a flat. Buyers will be charged for the carpet area, not the super built-up area as specified in the Act. Builders typically offer flats based on the built-in size, which includes a common passage area, stairs, and other places that are 20-30% larger than the actual flat’s area, but not all purchasers are aware of the idea of carpet area. Declaring the actual carpet area will be required under this rule.
- Builders frequently use large discounts and pre-launch offers to entice purchasers. The buyer is attracted by the offers and disregards the clearance; but, due to delays in obtaining clearance, he does not receive the flat on time. As a result, RERA ensures that developers obtain all necessary approvals prior to selling flats.
- RERA’s Section 20 establishes state-level regulatory authorities known as “Real Estate Regulatory Authorities.” The Act allows state governments to create multiple regulatory authorities, each with the authority to register and maintain a database of real estate projects, which it then publishes on its website for public viewing; protect the interests of promoters, buyers, and real estate agents; develop sustainable and affordable housing; and provide advice to the government and ensure compliance with the Act and its Regulations.
- Section 43 of RERA establishes Real Estate Appellate Tribunal, where decisions of Real Estate Regulatory Authorities can be appealed.
- Further, as per RERA, imprisonment of up to 3 years for developers and up to 1 year in case of agents and buyers will be applied for violation of orders of Appellate Tribunals and Regulatory Authorities.
With all the advantages that RERA has to offer, it also has its fair share of disadvantages. Let’s discuss those.
LIMITATIONS OF RERA:
One of the primary drawbacks is that past real estate projects are not covered by RERA. RERA only applies to new construction projects. As a result, many buyers are not able to take advantage of the Act at all. Moving on, there are also delays imposed by the government, because a project cannot begin without receiving the necessary official approvals, which typically take up to two to three years. It is at the will of government entities to authorise projects in a timely manner so that developers can launch, complete, and deliver on time.
Adding on to that, there is no mandatory regulation for constructions smaller than 500 sq. mt. As a result, smaller developers are not bound to register. More importantly, it does not address developer’s fears concerning force majeure events, such as acts of God beyond the control of the ordinary man, which result in a labour scarcity or challenges due to the lack of a central repository of land titles or deeds.
CONCLUSION
To conclude, while the Act strives to empower and protect the interests of home buyers, promoters, buyers, and real estate agents by providing sustainable and affordable housing in India, it is high time government institutions are held accountable for clearance delays. A solid IT infrastructure should be developed for project monitoring and speedy redressal of grievances, so that all developer problems are addressed in a timely way, avoiding unnecessary court battles.
YLCC would like to thank Shivani Bharti for her valuable contributions in this article.
