The Real Estate Regulation and Development Act (RERA) is a revolutionary act passed by the Parliament of India to protect the fundamental rights and monetary interests of home buyers in India. The act also aims to improve transparency in the real estate sector, and boost investment, revenue, and fair trade practices. The act came into force on May 1, 2016, and strives to serves as an adjudicating body that can help in speedy redressal of disputes pertaining to the real estate industry.
Why was the RERA Act introduced?
Since inception, the real estate sector was growing in an untamed and unmanaged manner, with complete lack of transparency with regards to the skyrocketing prices of property, construction quality, delays, interests charged, ownership and litigations. In recent years, these issues rose to their all time high, and majority of the builders failed to keep up with the project deadlines (The Economic Times, 2017). Not just that, agents and brokers mislead homebuyers too by not informing them about the quality of construction or the status of properties under litigations. This led to huge disparity and was a cause of grave concern among homebuyers as their entire life savings were invested into buying the house.
Thus, to ensure greater lucidity and better accountability, the RERA Act was implemented. It requires all state administrations of India to establish an in-house Appellate Tribunal to resolve the disputes and complaints of homebuyers’. Not just that, it also mandates all builders to register their real estate projects before initiation.
“Home buyers are strongly advised not to invest in any housing project that is not RERA approved.”
Impact of RERA on home buyers’ experience
Thanks to RERA, a number of new rules and regulations have been formulated to safeguard the interests of Indian homebuyers. Let’s see what RERA has in store for you:
1. Complete clarity and transparency about the project
As per the new act, all real estate builders are required to detail all the critical information about their property during registration (The Hindu, 2017). This includes:
- Design and floor layout
- Land title status
- Builder and promoter details
- Statutory approval status
- All kinds of deeds and agreements
- Complete details of the brokers
- Architects and contractors involved
Apart from detailing the aforementioned information, builders also have to detail the exact size (carpet area) of their property. This is also a favorable move for homebuyers as builders now can no longer charge them by stating the super build-up area as the size of the property.
2. Timely delivery of the property
Untimely delivery of projects was the biggest concern of home buyers. Builders often used to surpass the deadlines of property completion on various pretexts. RERA mandates all real estate developers to clearly mention the date of completion at the time of registration. If they fail to meet the deadline, they are liable to compensate the buyers for their loss and face penalties and/or criminal charges (Hindustan Times, 2018).
3. No sudden hike in the price of property
Before the introduction of RERA, homebuyers were forced to bear the cost for any change in project. But now these costs will be borne by the developer.
4. Limitation on fund utilization
Builders now also have to set aside 70% of the initial funds in a separate account to be exclusively used for the construction of the property. This ensures that none of the projects will go on hold due to insufficient funds (Ghosh, 2016).
5. Capping on initial deposit
RERA has also capped the amount of initial deposit that builders can seek from home buyers. They now cannot take more than 10% as an initial deposit.
6. Sanitization of agents and brokers
Indian real estate agents are infamous for playing foul play with homebuyers and luring them to purchase the property by passing out wrong information. However, the new legislation has made it mandatory for agents and brokers to register themselves and sell only those properties that are RERA approved. They will also be fined and penalized if they are found to be passing out wrong information to the home buyers about the property (Hindustan Times, 2017).
7. Complete assurance of quality
As per the Act, builders are bound by a strict 5-year agreement with the buyers for the quality of construction. Thus, if any construction quality issues arise within five years of selling the property, the builder is bound to get them repaired without incurring any additional charges from the buyer (Money Control, 2017).
8. Quicker refunds
Thanks to RERA, homebuyers get the right to claim 10% penalty if the builder is not able to deliver the property on time or if the quality of construction is below expectations. In fact, such incidents can also lead to the cancellation of builder’s license.
While the act was initially criticized for lack of initiation and hasty implementation, it has become a powerful tool in the hands of home buyers and empowers them to safeguard their rights from misleading and fraudulent real estate developers (Economics Times, 2017). Homebuyers must carefully check if the builder and the property they are planning to buy are registered under RERA. This will not only help them protect their hard-earned money from going down the drain but will also help them strike a profitable deal.
References
- Economics Times (2017)Not yet received possession of flat? Here's how RERA can help you. Available at: https://economictimes.indiatimes.com/wealth/real-estate/not-yet-received-possession-of-flat-heres-how-rera-can-help-you/articleshow/58472430.cms
- Hindustan Times (2018) RERA forcing builders to focus on timely delivery this festive season. Available at: https://www.hindustantimes.com/real-estate/rera-forcing-builders-to-focus-on-timely-delivery-this-festive-season/story-GTp0ayVLQjck3zjnHNw1UM.html
- Money Control (2017) RERA: Homebuyers will now have the right to get structural defects rectified by builder. Available at: https://www.moneycontrol.com/news/business/real-estate/rera-homebuyers-will-now-have-the-right-to-get-structural-defects-rectified-by-builder-2275361.html
- Economics Times (2017)How RERA is expected to change your home-buying experience from May 1. Available at: https://economictimes.indiatimes.com/wealth/real-estate/how-rera-is-expected-to-change-your-home-buying-experience-from-may-1/articleshow/58429552.cms
