RERA, or the real estate (regulation and development) Act, got enacted on May 1, 2016. The main objective behind this Act was to create the Real Estate adjudicating authority, which would oversee and promote the real estate industry and ensure that plots, homes, or other real estate were sold effectively and transparently.
The Act was passed to protect real estate customers’ interests and create a swift dispute resolution system. Under RERA, every state must have an independent regulatory authority; for instance, the Maharashtra government has announced that all housing projects more prominent than 500 square metres or eight units must be listed with the state regulator. This Act helped areas in Mumbai with a high population rate where every home buyer needs protection and security for their investment.
Definition of RERA
The real estate regulatory authority, or RERA, was established in 2016 to protect residential customers and increase funding for the industry. Each state has implemented Act, which modifies the real estate industry and allows for quick and effective dispute resolution.
The main provisions of the RERA act cover all project-related information, real estate purchase and sale contracts, carpet area requirements, a 10% advance fee limit on apartments, a 70% deposit of the sales proceeds in an escrow account, timely project completion, and disciplinary measures. The RERA is one such broad Act that includes all the projects described above, regardless of whether they are commercial or residential.
To monitor how it functions, transparency and authority are required. The Act clarifies the contractual arrangement between homebuyers and builders and outlines the procedure for creating trust between the builder and the buyer. A state organisation has even regulated commercial and real estate transactions. Indian homebuyers can now receive their residential properties on scheduled time.
Features of RERA
RERA was created to improve reliability and transparency in real estate and housing contracts. Its key features include:
● Every Indian state should establish a RERA to govern, decide, and arbitrate any disputes involving real estate developments in that state.
● Individuals may complain to Real Estate Regulatory Authority if they are concerned that a developer, buyer, or agent has violated any of the Act’s regulations or provisions.
● RERA can prevent an agent, promoter, developer, or consumer from carrying out any actions for which a report has been made while an inquiry is being conducted.
● If RERA’s resolution to a complaint is unsatisfactory, the aggrieved party may challenge the verdict to the Appellate Tribunal.
● The organiser must pay a fine if they disobey RERA’s orders. This sum could equal as much as five percent of the property’s assessed value.
● No civil court will have jurisdiction or power for any issue under RERA or the Appellate Tribunal. As a result, no judge has the authority to stop RERA or the Appellate Tribunal from taking any particular action.
Why is RERA Important?
The Indian government and state governments majorly depend on real estate as a source of revenue. They impose several taxes related to real estate investments, including property tax, registration fees, and stamp duty.
● Real estate regulatory authorities were necessary to increase investors’ confidence in India’s real estate market. RERA offers a balance for both homebuyers and builders and helps to reduce the risks initially experienced by the people.
● Buyers now have access to all relevant information about projects and the ability to review all essential documents due to the introduction of the Real estate regulatory authority in real estate.
● The developers or builders must ensure that the homebuyers have timely possession, or they will be required to pay interest and compensate for late delivery.
● The RERA also ensures developers market properties based on carpet areas rather than heavily developed regions. As a result, there is now more
transparency and reliability.
Issues Before the Commencement of RERA
● The time-consuming approval procedure for project clearances
● The lack of definite land ownership
● Black money use is common
● The developer transferred funds from one project to another, which was more profitable.
● Construction has stopped, or the developer abandoned the project before it was finished.
● The developer transforms the building’s design after the payment is made.
● Legal conflicts (It was resolved in the courts)
● Endemic problems, such as recent recessive conditions
Benefits of the RERA Act
1: Standardized Carpet Area
The term “carpet area” refers to an apartment’s net usable floor area, excluding any areas covered by external walls, areas beneath services shafts, exclusive balconies or verandas, and exclusive open terraces. It would bring uniformity in estimating the Carpet Area because the term has been properly defined.
In the past, builders would exaggerate the carpet area, which would drive up the property’s price. However, since RERA has officially outlined the specific process for calculating carpet area, developers can no longer modify the computation to raise pricing.
2: The Builders Cannot Delay the Project
Unable to obtain possession of a property from the builder will no longer be a problem under RERA. Developers who delay the delivery deadline must pay 2% more in interest than what the State Bank of India is lending to homebuyers. Moreover, a penalty of a few years behind bars is a possibility.
3: Decreases the Chance of Bankruptcy or Insolvency for Builders
A developer generally has multiple projects under construction at once. Earlier, Developers were free to use the revenue generated for Project A to pay for Project B’s construction.
However, it is no longer possible as the builder is required to transfer 70% of the project’s revenue to a different bank account called an escrow account due to the implementation of RERA. He can only withdraw money from this account once the project has been confirmed as complete by a civil engineer, an architect, and a practising chartered accountant.
As the money can no longer be utilised for other projects or other purposes, it will be guaranteed that it is used solely for the purpose for which it was raised.
4: Grievances will be Addressed and Immediately Resolved
RERA established regulatory authorities and appellate tribunals in every state to handle issues between builders and buyers. Any person who feels violated by a decision may seek an answer from the appellate authority within 120 days.
5: No More Deceptive Advertising
Many builders used false promises and offered to market their projects. However, under RERA, every advertisement must provide the RERA registration details. All promotions and classified advertising will be required to be truthful and free of any false promises.
RERA’s Effects on the Real Estate Sector
● Early backlog
● An increase in project costs
● Limited funding
● Capital costs rising
● accelerated project launch schedule
Well, there is still a lot of work to be done to register the newly formed and unregistered projects. The current state of the projects started in the preceding five years is covered in the smallest detail. It also contains information about the promoter and a thorough description of how the plan was carried out. Additionally, RERA creates the finest framework for efficiently tracing dispute resolutions and achieving expected success.
Registration of Project under RERA
According to the Real estate regulatory authority, a real estate property must get registered if the amount of land constructed exceeds 500 sq m or if there are more than eight units. It further specified that the projects for which the occupancy certificate (OC) or completion certificate (CC) had not been granted on or before the date the Act went into effect were also needed to register with the RERA.
● The promoter generates a user Identity on the RERA website of the respected state.
● The applicant creates a promoter profile and uploads project information (papers, maps, etc.).
● After paying the required fees, an online registration application is submitted.
● According to section 5 of the RERA Act, 2016, Within 30 days of receiving the complete online application, the Authority issues registration no. The applicant gets their registration number via email and SMS.
● The promoter and project-related documentation are also provided to the Registrar’s office, along with a hard copy of the application form.
● A certification of registration is given once the hard copy is produced.
The builders are expected to disclose all project-related information during the process of RERA registration, including the project’s land status, approvals, estimated completion date, promoter information, etc. Without the required RERA registration, developers and builders are not permitted to market or advertise any real estate venture or any element thereof.
What is Not Included Under RERA?
● A real estate project promoter that received a certificate of completion before the Act’s implementation.
● The overall amount of land is less than 500 sqm, and the number of apartments needed throughout all stages is less than 8.
● A building, plot, or real estate project carried out solely for repair, development, or renovation didn’t involve the marketing, promotion, or sale of any such unit, plot, or structure.
● Any construction project that is outside the limitations of the Planning Area.
● However, by order, the RERA authority may instruct the promoter of such a project to submit the proposal under RERA if it considers it necessary in the best interest of landowners for investment in real estate being formed outside the Planning Scheme.
Escrow account under RERA
The RERA Act requires an “Escrow Account” to hold roughly 70% of the overall amount collected from homebuyers. If the real estate company defaults, an escrow account cushions against damage.
The balance of the money collected from homebuyers is secure in the account known as escrow and continues to be governed by RERA because only 30% of the money can be used for construction. The idea of this account was developed in response to instances where developers would deceive homebuyers for their money and use it completely for building.
The homebuyers would lose their complete investment if the project got stuck or stalled. Escrow accounts have protected purchasers’ hard-earned money from dishonest developers.
Issues Related to RERA in India
Many cities have vacant or abandoned buildings, especially Mumbai, where residents have lived for decades at artificially low rents. In India, more than 74% of prospective homeowners are unaware of the Real Estate Act’s online process for determining a project’s status and are unsure whether or not projects are listed on websites. They lack essential details, including carpet size, payment options, and the builder’s registration number. Numerous projects were required to register on databases and distribute brochures with information about the builders.
Penalties Under RERA
The RERA Act lays out punishments for breaking the law for developers or builders. If a buyer registers a complaint against a builder/developer, they may be subject to the following:
● If developers fail to register with the appropriate RERA, they will be liable for 10% of the project’s anticipated cost. In addition, if they are proven guilty of giving misleading data about the project, builders will be fined 5% of the estimated cost.
● A developer faces up to three years in jail or a fine equal to 10% of the project’s estimated cost if they are found to have broken any RERA Act regulations.
● If they are discovered carrying out construction work or transactions on the project with no legitimate RERA registration, real estate agents face a fine of up to Rs.10,000 per day or 5% of the project’s cost.
● Any builder who violates the Appellate Tribunal’s order may be subject to a fine of 10% of the project’s estimated cost, up to a year in jail, or both.
Conclusion
The Act is a significant improvement in terms of improving market transparency, raising promoter and developer responsibility, and establishing efficient mechanisms for grievance resolution. There will be fewer disputes because strict rules and restrictions exist in a completely corrupt business.
Creating rules like Real estate regulatory authority is a significant advancement in increasing customer, promoter, and builder awareness. The advancement of land registry, land development, and GST may be emphasised in the future, much like RERA, to expand the real estate sector.
Numerous policy decisions made in accordance with the RERA will unquestionably result in substantial advancements in the socio-economic transformation, hence promoting the long-term growth of the RERA and the consumer environment.
