RERA ACT

What is RERA? Know all about RERA Act 2016, Registration, Benefits, Penalty What is RERA? RERA full form is Real Estate (Regulation and Development) Act, 2016. RERA was formulated to regulate the hitherto unorganised and unregulated real estate sector of India. In the absence of an efficient regulator, the incidents of tussle and disputes between homebuyers and developers were on the rise. The RERA Act of 2016 was implemented to address the concerns and grievances of real estate developers, homebuyers, realty agents, and other stakeholders of the real estate sector. After the implementation of the RERA Act, Rera approved projects are preferred by the homebuyers. All real estate projects of more than 500 sq m must be registered with respective RERA authorities. In addition to this, every such builder has to inform the homebuyer of the progress of construction, abide by the timelines and follow the rules as stated in the RERA Act. Benefits of the RERA Act, 2016 The RERA Act has brought some benefits from the day it was implemented, lets have a look RERA has improved the transparency and accountability in the real estate sector of India. As it is mandatory for the real estate developers to register with the state RERA before they start a project, the instances of misleading claims have been minimised. RERA Act protects the rights of both homebuyers and real estate developers. RERA Act has mandated the establishment of state wise regulatory bodies which keep an eye on real estate development in every state and union territory. This has reduced the delays in project completions and prevented misleading information from homebuyers. RERA safeguards the interest of homebuyers by imposing penalties on defaulting developers for delaying projects or not abiding by the Act. However, developers may ask for an extension over the project delivery timelines and penalty norms under section 5 of the RERA Act under two circumstances If there is a delay in the project delivery due to natural calamities such as floods, cyclones, etc. The developer can state the reason to justify the delay and pay the penalty (if any). If there is a shortage of supply of raw material, shortage of labour, etc. then, the developer can justify that he is at no fault. However, the developer has to inform the RERA Authority in writing. However, the delay should not be for more than one year. RERA Benefits for the Homebuyers The RERA Act broadly safeguards the home buyers interest. lets have a look at the key benefits of RERA With the implementation of the RERA Act, the developers have to disclose the project details on the official website of RERA and are to be updated regularly to assure buyers trust. The consumer/home buyer will pay for the flats on the Carpet Area and not the Super built up Area. The real estate developer will have to transfer around 70% of project funds in a separate escrow account, which he can use for construction purposes only. For any delay in the construction of a project, the developer has to pay 2% to the homebuyer. Post the delivery of a project the developer has to provide free of cost services for construction defects to homebuyers for up to the first five years. How can real estate developers register their projects under RERA? For registering their real estate project, real estate developer/builder must submit an application to the concerned State Real Estate Regulatory Authority (RERA) in the manner and form, within such time and coupled with requisite fee payment as specified by the Authority. The developer must include the following documents with the project registration application with RERA. Succinct details of the developers company/enterprise, with the name, type (company, partnership, or a proprietorship) with a registered address, as well as the name and photo of the promoter /developer. Details of the projects launched by the concerned developer within the last five years and the present status of the project. Details of any cases or due payments by the developer. An authenticated/attested copy of the commencement certificate (CC) and mandatory approvals from the competent Authority for the realty project. If the developer wants to complete the project in phases, the attested/authenticated copy of the afore mentioned requirements from the competent Authority for each project phase, separately. Building layout plan, final sanctioned plan, and details/specifications of a specific phase or the proposed project, duly authorized by the competent Authority. Information about the development work to be completed in the project. Details about exact project location, demarcation of land to be used for the project with clear boundaries, with longitude and latitude of the projects endpoints. Completed Proforma of the sale agreement, conveyance deed, and allotment letter to be signed with the homebuyers. The number, configuration, and carpet area of the flats/apartments for sale in the concerned project accompanied by terrace areas, veranda, or balcony areas, if any, are included with the apartment for sale. Specifications of the area and number of garages for sale in the proposed project. Name and address proofs of the people concerned with the projects construction, such as contractor, architect, structural engineer, and real estate agents, etc. What are the Penalties under RERA? The RERA Act prescribes penalties for not abiding by the laws for promoters or builders. Heres a list of penalties a builder/developer can get if a homebuyer files a complaint against him Developers will have to pay 10% of the projects estimated cost if they do not register under the respective RERA. Also, they will be charged 5% of the projects estimated cost if they are found guilty of providing any false information about the project. If a developer is found violating any law under the RERA Act, there will be imprisonment for up to 3 years or 10% of the projects estimated cost. Real estate agents are liable to pay Rs.10,000 per day or up to 5% of the cost of the project if they are found doing construction or sales on their project without a valid RERA registration. Any severe non compliance with RERA will impose a penalty of up to 5% of the projects value on developers. In case any builder shows non compliance with the decision of the Appellate Tribunal, he/she could face a penalty of imprisonment for up to 1 year, or 10% of the projects cost, or both. The homebuyers must be extra vigilant before filing a complaint because if the charges imposed on the developer were found baseless or false, the homebuyer would have to pay a penalty of up to 5% of the projects value. Also, non compliance with the Appellate Tribunal will cost a homebuyer 10% of the project’s cost or up to one year of imprisonment. What are the challenges in front of RERA? RERA is indeed a remarkable step taken in real estate and has shown results in the recent past. The RERA Act has enhanced the transparency in the real estate sector thus, providing a safe environment for investors and homebuyers by removing the non registered players from the market. Despite this, there are several challenges and shortcomings in the RERA Act viz Absence of rules regarding project approvals Despite talking in detail about the duties and rights of homebuyers and real estate developers, the RERA Act is silent on the issue of delay in necessary approvals due to clearance from government authorities. In general, all government approvals take up to two years from the date of application. The act does not hold government authorities accountable for the delay. No Single Window Mechanism the real estate project developers face the daunting task of taking individual clearance from each government department, and it adds up to the overall project delivery timeline. The presence of a single-window mechanism would have expedited the project completion manifold. Lack of clarity regarding state specific content The absence of clarity on certain matters of RERA is ambiguous. For instance, the RERA authorities of Delhi, Karnataka, Haryana, Gujarat and Uttar Pradesh have not released a standard format for certification by engineers, auditors and chartered accountants. Tedious Registration Process No uniformity in state RERA makes the registration process very tedious. For example, the presence of two RERAs or an alternate authority such as the West Bengal Housing Industry Regulatory Authority (WB HIRA) makes the registration of projects and real estate agents confusing and tedious. Lack of Technical Knowledge The online and technology backed registration process might come in handy for the metropolitan developers, but it creates a problem for developers and builders from non metro and Tier 2 and 3 cities. RERA must start an outreach program for developers’ education and try to start the registration process in local languages. Conclusively, RERA Act was implemented in 2016 to regulate the Real Estate sector to enhance transparency, remove discrepancies and safeguard the interest of home buyers and real estate developers. RERA has massively helped in regulating the real estate sector across India.