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RERA

Source : 11 Sep, 2018

RERA or Real Estate (Regulation and Development) Act, 2016 aims at protecting the home purchasers and also boosts the real estate investments. The bill of this Parliament of India Act was passed on 10 March 2016 by the Upper House (Rajya Sabha). The RERA Act was effective on and from 1 May 2016. During this time, Out of 92 sections, 52 were notified. All the other provisions were effective on and from 1 May 2017.

Rera Full Form:

The full form of rera is Real Estate Regulatory Authority. This act was introduced by the Indian National Congress government in 2013.

RERA Act Rules:

The Real Estate (Regulation and Development) Act, 2016 under Section 84 envisions that within a period of six months from its commencement date, State Governments will set the rules to carry out the provisions associated with the Act.

  • On 31 October 2016, the centre, through HUPA (Housing & Urban Poverty Alleviation) Ministry, released the general rules of the Real Estate (Regulation and Development) Act, 2016.
  • All these rules are applicable to the Union Territories like Chandigarh, Lakshadweep, Daman & Diu, Dadra & Nagar Haveli and Andaman & Nicobar Islands.

Some Points under Real Estate Regulation and Development (RERA)

  • Security

    Under the RERA act, a minimum of 70% of the buyers’ and investors’ money will be kept in a separate account. This money will then be allotted to the builders only for construction and land related costs

    Developers and builders cannot ask for more than 10% of the property’s cost as an advance payment before the sale agreement is signed.

  • Transparency

    Builders are supposed to submit the original documents for all projects they undertake.

    Builders are not supposed to make any changes to the plans without the consent of the buyer.

  • Fairness

    RERA has now instructed developers to sell properties based on carpet area and not super built up area.

    In the event that the project has been delayed, buyers are entitled to get back the entire money invested or they can choose to be invested and receive monthly investment on their money.

  • Quality: The builder must rectify any issue faced by the buyer within 5 years of purchase. This issue must be rectified within 30 days of the complaint.

  • Authorisation: A regulator cannot advertise, sell, build, invest, or book a plot without registering with the regulator. After registration, all the advertisement for investments should bear a unique project wise registration number provided by RERA.   

How Does RERA Act Benefit the Home Purchasers?

The Real Estate (Regulation and Development) Act, 2016 is expected to increase the real estate demand. There are different ways in which RERA Act can help the home buyers.

  • Builders will not be able to delay projects
  • Builders will not be allowed to charge for area beyond the walls
  • Builders will be held responsible for defects found in the house
  • Builders will not be allowed to use your money to build someone else’s house
  • Grievances will be redressed quickly

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Impact of RERA Act:

After the Real Estate (Regulation and Development) Act, 2016 enforcement, registration of sale deed of a project unit cannot be done in the office of the sub-registrar without obtaining Occupancy Certificates or Completion Certificates. At present, unit registrations are taking place without checking. It is occurring without obtaining Occupancy Certificates or Completion Certificates. No one is bothered about the legal consequences. The Department of Stamps & Registrations know about the RERA Act implications but they have not taken necessary steps to stop the unlawful sale deed registrations of such properties.

Rera Impact on Real Estate

  • Fewer project will be launched as the promoters and builders will spend time to understand the impact of the Real Estate (Regulation and Development) Act, 2016. However, the honest promoters / builders / developers will benefit from this scenario as they will face lesser competition.
  • Dishonest builders will disappear as they will fail to sustain in the market after the RERA Act is implemented.
  • The 32 sections that have been added to the Real Estate (Regulation and Development) Act, 2016 will encourage a financial discipline in this sector.
  • After the Act implementation, the developers will have to follow several formalities if they wish to make certain changes to the project after its commencement. A short-term chaos might break out in the real estate industry but in the long run, it will boost the confidence of the customers and they will invest more.

Carpet Area Defined Under RERA Act:

The Real Estate (Regulation and Development) Act, 2016 has mandated the developers on how to sell their apartments depending on the carpet area.

  • According to the Act, carpet area is the total area of the floor that can be used within the walls of the apartment. This does not include areas like open terrace, shafts, balconies, etc.
  • This normalization of the carpet area definition will ensure that buyers are not mislead by the unlawful promoters.

As the loading factor is high, the saleable area can be inflated by the developer. This will allow the developer to reduce rate per square feet on the saleable area that is inflated. This is extremely misleading as the home purchasers get happy assuming that they are getting amazing rates. However, the flat size never changes, only the loading factor does.

Using the standard for carpet area will ensure that there is a certainty on the usable area. This also helps in the analysis of cost per square feet. Comparison between the different projects also becomes easier.

How Can You Ensure that the Property is RERA Compliant?

Things that must be considered to understand if a property is RERA compliant are mentioned below:

  • If the area of the property is more than 500 square meters, the builders should register it under RERA Act before launching or advertising a project on that particular property.
  • Builders must provide proof that 70% of the total payment has been deposited by them into a discrete escrow account instead of using it for some other investment.
  • Builders must get all the necessary consents before advertising a new project. Discounts for early bird bookings and pre-launch offers will not be there anymore.

Penalties Under RERA:

  • Penal consequences of promoter defaults
    • Contravention of Section 3 (Registration)
  • All projects must be registered with RERA. If not, a penalty of 10% of estimated project cost will be levied.
  • Continuous default after the penalty will result in imprisonment of up to 3 years or a fine of 10% of the estimated project cost.
  • The penalty amount will be determined by RERA.
  • Contravention of Section 4 (Furnish Information)
    • Promoter must make application within the stipulated time.
    • If not acted as per provision and information submitted is fake, penalty of 5% of the estimated project cost will be levied.
  • Contravention of other Provisions of the RERA Act
    • As a punishment for breaking any provision or regulation under the Act, a penalty of 5% of the estimated project cost will be levied.
    • The penalty amount will be determined by RERA.
  • Failure to Comply with RERA Orders
    • Upon failure to comply with the regulations under the RERA Act, a penalty of 5% of the estimated project cost will be levied.
  • Failure to Comply with the Orders of Real Estate Appellate Tribunal
    • Upon failure to comply with the regulations set by the Real Estate Appellate Tribunal, a penalty of 10% of the estimated project cost will be levied
  • Defaults committed by allottees
    • Failure to comply with RERA orders
      • Upon failure to comply with the regulations under the RERA Act, a penalty of 5% of the estimated project cost will be levied.
    • Failure to comply with the orders of Real Estate Appellate Tribunal
      • Upon failure to comply with the regulations set by the Real Estate Appellate Tribunal, a penalty of 10% of the estimated project cost will be levied
  • Penal consequences for agent defaults
    • Failure to facilitate purchase or sale without registration
      • The Act does not allow real estate agents from initiating the purchase or sale of a building.
      • Violation can levy a penalty of Rs.10,000 per day. A total penalty of 5% of the estimated project cost will be levied.
    • Failure to perform functions under the RERA Act
      • Violation can levy a penalty of Rs.10,000 per day. A total penalty of 5% of the estimated project cost will be levied.
    • Failure to comply with RERA orders
      • Upon failure to comply with the regulations under the RERA Act, a penalty of 5% of the estimated project cost will be levied.
    • Failure to comply with the orders of Real Estate Appellate Tribunal
      • Upon failure to comply with the regulations set by the Real Estate Appellate Tribunal, a penalty of 10% of the estimated project cost will be levied

Note: All Inforamtion provided by third party source.

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