Advantage Home Buyers: Real Estate (Regulation & Development) Act, 2016
Protects the Interest of Home Buyers 5 – years Defect Liability Guarantee
- TRANSPARENCY – Rights to all project details such as land title, sanctioned plans, project approvals, cost of construction, status, etc.
- REGISTERED PROJECTS – Developers can advertise, market, sell or offer for sale, any plot, apartment or building on the projects registered with the RERA.
- DEVELOPERS LIABILITY FOR DEFECTS – 5 years free-of-cost guarantee from structural / workmanship defect or any other quality or provision of services or any other obligations of promoter as per agreement for sale from the date of handing over possession;
- PRIOR APPROVAL FROM BUYERS TO BE TAKEN BY DEVELOPER – If Developer, makes any additions and alterations in the sanctioned plans, layout plans and specifications etc. he needs to take previous consent of at least two-thirds of the allottees.
- Stringent penalties / penal provisions for violation of orders of Appellate Tribunals and Regulatory Authorities.
What is RERA? Or RERA Act?
The Real Estate sector in India has grown in the last decade but has largely been unregulated from the perspective of consumer – home buyer protection. Though, consumer protection laws were available, the recourse available therein was only curative, but not preventive. This affected the overall potential growth of the sector due to absence of professionalism and standardization. And thus this made the Government of India realize that there is a need for a Strong System under which the Whole Real Estate Industry can be regulated. The Real Estate (Regulation and Development) Act, 2016 (RERA) (the Act, from here on) is an initiative by Indian Government to enhance transparency in the real estate related transactions by creating a systematic and a uniform regulatory environment, thereby protecting consumers’ interest and making real estate developers liable for timely completion of projects, as well as to help boost investments in the real estate industry.
The RERA Act is a Central Act. It is enacted by an Act of the Parliament seeking protection to home-buyers as well as to help boost investments in the real estate industry. It came in to force from 1st May, 2016, after it was passed in the Rajya Sabha on 10th March, 2016, and in the Lok Sabha on 15th March, 2016.All the sections of the Act came into force with effect from May 1, 2017.
The Act is intended to achieve the following objectives:
- To establish the Real Estate Regulatory Authority (RERA).
- Ensure accountability towards allottees (home buyers) and protect their interest.
- Infuse transparency, ensure fair-play and reduce frauds & delays.
- Imposing certain responsibilities on both promoter and allottees.
- Establish regulatory oversight mechanism to enforce contracts.
- Establish fast- track dispute resolution mechanism.
- To set up an Appellate Tribunal to hear appeals from the decisions, directions or orders of the RERA.
Some of the key takeaways of the Act are:
- The Act establishes Real Estate Regulatory Authority (RERA) in each state for regulation and promotion of the real estate sector in the state and also act as an adjudicating body for speedy dispute redressal.
- 70 percent of the customer’s advances to be deposited into a separate dedicated project account. The withdrawals have to be certified by architects, Chartered Accountant (CA) and project engineers. This mechanism will prevent the diversion of money towards other purposes and will be utilized only towards project completion.
- Promoter has to mandatorily register the project for all commercial and residential real estate projects where the land is over 500 square meters or includes eight apartments before advertising or selling it. He has to provide full and true disclosure in terms of various aspects of the project ranging from project details, financial details to legal details.
- The apartments are to be sold only on carpet area basis. Carpet Area meaning, or carpet area as per rera means the net usable floor area of an apartment. This excludes the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment. And every phase of apartment will be considered a standalone real estate project, and separate registration needs to be obtained for each project.
- The developer can’t make any changes to the plan without the written consent of 2/3rd of the allottees. This provision will not allow the developer to increase the cost of their projects.
- It is compulsory for a state to establish a State Real Estate Regulatory Authority as per the new Act. Buyers could approach this body for redressal of their grievances.
- The Promoter has to rectify such defects be it Structural, or any defect in workmanship, quality, provision or services bought up by the buyer to the notice of the promoter within 5 years from the date of the possession.
- Both buyers and promoters will have to pay the same rate of penal interest for delays. In case of delay, the promoter will be required to pay an interest rate of the State Bank of India’s highest marginal cost of lending rate plus 2 percent within 45 days of it becoming due.
Key Obligation & Benefits of RERA to Home Buyer
RERA has set up some fundamental functions for the buyers which are laid upon as their rights.
- A buyer is entitled to know all the Sanctioned plans, Layout Plans of a real estate project in detail. He also has the right to know the stage-wise time schedule of completion of the project which includes the amenities and services as agreed upon between the buyers and the promoters as well.
- A buyer is entitled to claim a written possession of his house and the common areas which he is entitled to as a member of the project. He has the right to get all the documents regarding the project.
- A buyer who has entered in to an agreement for sale to take an apartment is responsible to pay the necessary amount in the manner and within the time as specified in the agreement. He will have to pay interests if he delays the payment. However, a promoter shall pay the same interest to the buyer if he delays the project or if he has not been able to provide what was agreed in the agreement.
- The buyer shall participate towards the formation of an association after taking the physical possession of his house.
- The Buyer shall take physical possession of the apartment, within a period of two months of the occupancy certificate is issued.
RERA For Promoters
Following are the guidelines that are set up by RERA for the promoters.
- RERA Registration – The promoter is primarily responsible to get the real estate project registered with RERA. The builder or promoter is also accountable for all obligations, responsibilities and functions under the provisions of RERA Act.
- Changes to the registered plan – If a plan has been registered under RERA, it can only be changed with the consent of two-third buyers of that project. This will help the Authority and the buyers to tackle the problems arising due to the consistent change of plans by a promoter even if the buyer has signed an agreement with a particular plan and layout of the project.
- Public Portal – If the project gets registered, then the promoter will be provided a login ID and password so that he can upload all the details of the real estate project along with his photograph on the RERA India’s website. This will be done so that a buyer can access to all the necessary project details that he should know before signing the agreement. A promoter cannot advertise a project until it gets registered. Also, the website will contain the list of defaulters so that a buyer can be beware of them.
- Elimination of the misuse of funds – A separate account would be opened in the name of the project, and that Seventy percent (70%) of the amount realised by the promoters from the buyers, from time to time has to be deposited in that Separate account and the amount has to be utilised for that purpose only. (i.e. for construction of the Project only).
- Provided further that the amount can only be withdrawn to cover the Cost of the project, in proportion to the Percentage of Completion of the project, the amount shall be withdrawn by the promoter after it is certified by an engineer, an architect and a chartered accountant in practice that the withdrawal is in proportion to the completion of the project. He shall also get his accounts audited within six months after the end of the financial year by a Chartered Account and produce a statement of accounts duly certified by such C.A.
Functions and Duties of a Promoter
- The Promoter Shall update the status/details of a project’s registered, on the webpage created on the website of the Authority, quarterly up-to-date, the list of number and type of apartments or plots booked. The promoter shall be responsible for all obligations, responsibilities and functions to the allottees as per the agreement for sale.
- The responsibility of the promoter, with respect to the structural defect or any other defect shall continue even after the conveyance deed of all the apartments, plots or buildings, as the case may be, to the allottees.
- The promoter shall be responsible to obtain the completion certificate or the occupancy certificate, or both, as applicable, from the relevant competent authority as per local laws or other laws for the time being in force and to make it available to the allottees individually or to the association of allottees.
- The promoter cannot transfer the real estate project without the consent of two-third buyers of that project and without the prior approval of the Authority. A promoter has to refund and return the entire amount if he fails to deliver a project.
RERA For Real Estate Agents
The Real Estate agents are the medium between a buyer and a promoter. They have a strong presence in real estate sector as they have the marketing skills to profitably buy or sell a property. A buyer does not know all the property details and a promoter does not sell his properties himself, thus, a real estate agents role is of paramount importance.
Following are the guidelines for RERA Registration for Agents that a real estate agent has to follow.
- A person has to get registered with RERA as a Real Estate Agent in order to be eligible to or act as an agent into buying and selling of a plot, flat or anything related to the real estate sector. Simply put, a real estate agent must register with the authority.
- After a person becomes a real estate agent through registration with RERA, he will still have to keep a check on his activities because if the government finds any fraudulent activity in their work, the Authority has the power to cancel their registration with proper remarks and by giving them a proper opportunity of being heard.
- The agent should keep and maintain all the records, accounts and documents of a real estate project he has been indulged with. He should also keep a background check of a builder in order to make a buyer safe.
- He shall not indulge himself/ or act as an agent into buying and selling of a project, apartments or plot which are not registered with the Real Estate Regulation Authority.
- He should abandon all the fraudulent behaviour related to buying or selling a real estate project. He should not give false or misleading information to a buyer about a project and should not represent himself as a promoter and approve to things of which the real promoter does not approve of.
- As per the RERA Act, a person or an organization working as a real estate agent should not advertise the services which are not a part of the project.
- He must provide all the documents related to booking, account, and registration which a buyer must have while buying a plot or a house.