Planning to buy a house and still wondering what RERA is? The sole purpose of this article is to break down RERA for you and help you make a decision worth it.
The Real Estate (Regulation and Development) Act, 2016 (RERA), is designed to protect the interests of home buyers and enhance transparency in the Real Estate sector. We analysed how it will impact the two main stakeholders – home-buyers and builders – and the need-to-knows of the act.
The Government of India passed the Real Estate (Regulation and Development) Act 2016 on March 26, 2016, and its provisions came into effect, from May 1, 2017. Developers have been given a deadline of the end of July 2017, to register their projects under RERA. Similarly, real estate agents, who also fall within the Real Estate Ecosystem, are still in the process of registering themselves. Several states still need to notify the rules under the Act and most importantly buyers and developers need to register their projects under RERA.
What is RERA (Real Estate Regulatory Act)?
The Real Estate (Regulation and Development) Act, 2016 (RERA) is an Act passed by the Indian Parliament which seeks to protect the interests of home buyers and boost investments in the real estate sector.
The Rajya Sabha passed the RERA bill on March 10, 2016, followed by the Lok Sabha on March 15, 2016, and it came into force from May 1, 2016. 59 out of 92 sections were notified on May 1, 2016, and the remaining provisions came into effect from May 1, 2017. Under the Act, the central and state governments, are required to notify their own rules under the Act on the basis of the model rules framed under the central Act.
Why is RERA needed?
Home buyers had been complaining that real estate transactions were uneven and heavily in bias towards the developers. RERA, the government’s model code, aims to create a more unbiased and fair transaction between the seller and the buyer of properties, especially in the primary market. RERA is hoped to make real estate purchase much simpler, by bringing in better responsibility and transparency, provided that the states do not modify the provisions and the essence of the central act.
The RERA will give the Indian Real Estate Industry its first regulator. The Real Estate Act makes it mandatory for each state and union territory, to form its own regulator and frame the rules that will govern the functioning of the regulator.
Projects falling under RERA
- Commercial and residential projects including plotted development.
- Projects measuring more than 500 sq. Mts. or 8 units.
- Projects without Completion Certificate, before the commencement of the Act.
- Projects for the purpose of renovation/repair which does not involve re-allotment and marketing, advertising, selling or new allotment of any apartments, plot or building in the real estate project, will not come under RERA.
- Each phase is to be treated as a standalone real estate project requiring fresh registration.
How to register projects under RERA
To register your project under RERA, an authenticated copy of all approvals, commencement certificate, sanctioned plan, layout plan, specifications, plan of development work, proposed facilities, Proforma allotment letter, an agreement for sale and conveyance deed to be given when:
- Applying for project registration with RERA.
- Mandatory registration of new and existing projects with RERA before launch.
- Registration of agents/brokers with RERA.
- Conflict settlement within 6 months at RERA and RERA appellate tribunals.
- Separate registration of all the phases of a single project
- Developers to share details of projects launched in last 5 years with status and reasoning for the delay, if any, with RERA
- Regular update on RERA website
- Maximum one-year extension in case of delay, with no fault of the developer
- Annual audit of project accounts by a Chartered Accountant
- Conveyance deed for common area in favour of RWA
- Construction and land title insurance
- Project completion time frame
Impact of RERA on Home Buyers
Some of the important assets are:
- Informing allottees about any minor addition or modification
- Consent of two-third allottees about any other addition or modification
- No launch or advertisement before registration with RERA
- Consent of two-third allottees for transferring majority rights to a third party
- Sharing information about project plan, layout, government approvals, land title status, sub-contractors
- Increased affirmation on completion of projects and delivery to the consumers within time
- An increase in the quality of construction due to a defect liability period of five years
- Formation of RWA within a specified time or three months after majority of units have been sold
Impact of RERA on Builders
Some of the important aspects are:
- Project registration
- Withdrawal – POC method
- Website updates/disclosures
- Carpet area
- Alteration in project – approval of two-third allottees
- Project accounts – Audit
- 70% of the funds collected from allottees needs to be deposited in the Project/Reserve Account; withdrawals to cover construction and land cost
- Withdrawals to be in proportion with the percentage of completion of the project
- Withdrawal to be certified by an Engineer, an Architect, and a Chartered Accountant
- Provision for RERA to freeze project bank accounts or Reserve Account upon non-compliance
- Interest on delay will be same for both customer and promoter
What information does a builder need to provide under RERA
- Number, type and carpet area of apartments.
- Consent from related allottees for any major addition or modification
- Quarterly updating of RERA website with details such as unsold inventories and pending approvals
- Project completion deadline
- No false declarations or commitments in advertisement
- No casual cancellation of units by promoter
Benefits of RERA
Now that you have a fair idea of what RERA is and how it works, let us conclude with the benefits that you, as a builder or a buyer alike, are entitled to receive upon registering your project with RERA or with its mere existence.
Hence, RERA is an act, which creates more transparency in your dream of building a house, mutually benefitting all its stakeholders, simultaneously creating a more organized sector. It might sound like a lot of effort in legal procedures, but at last, you are at the receiving end with crystal clear elements related to your sale or purchase.