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RERA ACT - Real Estate Regulatory Authority, RERA Rules

Admin | 2022-07-27

RERA stands for Real Estate Regulatory Authority came into existence as per the Real Estate (Regulation and Development) Act, 2016 which aims to protect 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. At that time, out of 92 sections only 52 were notified. All the other provisions were effective on and from 1 May 2017.

RERA Act and 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.
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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.
Authorization: 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.

Salient Features
RERA was established to enhance accountability and transparency with respect to housing transactions and real estate. Here are the salient features of this Act:

Establishment of Real Estate Regulatory Authority in every Indian state in order to monitor as well as adjudicate and arbitrate any disputes with respect to real estate projects in the concerned state.
Establishment of a fast-track mechanism for settlement of disputes. This will be done via an appellate tribunal and dedicated adjudicating officers.
All real estate projects must be registered with RERA so that the authority will have jurisdiction over the projects. The registration of a particular project can be rejected by the authority if guidelines have not been adhered to.
In case a promoter wishes to transfer or assign a majority of your rights and liabilities in a real estate project to a third party, written consent from two-thirds of the allottees will be needed in addition of the written approval of RERA.
If there is any default from the side of the buyer or promoter, both will be liable to pay an equal rate of interest.
If the promoter causes any losses to the buyer due to other people laying claim to property (defective title of land) which is under construction or has been constructed, the promoter will have to compensate the buyer. There is no limitation provided by any law currently with respect to the compensation amount.
If a person has any problems regarding violation of the provisions or rules of this Act by a promoter, buyer, or an agent, they can file a complaint with RERA.
While an enquiry is taking place, RERA can stop an agent, promoter, or buyer from continuing any activity against which a complaint has been raised.
If any of RERA decisions regarding a complaint is not satisfactory, the aggrieved party can submit an appeal before the Appellate Tribunal.
If the promoter fails to follow RERA orders, they will have to pay a penalty. This amount could be up to 5% of the evaluated cost of the property.
If the Appellate Tribunal’s orders are not complied with, a penalty will have to be paid. This can either be imprisonment for up to 3 years or a fine (up to 10% of the approximate cost of the project), or both.
If a company commits an offence under this ACT, any person who was in charge of the business at the time of the offence being committed and the company will be held guilty and will be punished.
No civil court will have any jurisdiction with respect to any matter that comes under RERA or the Appellate Tribunal jurisdiction. As such, no court can grant an injunction with regards to any action taken by RERA or the Tribunal.
Benefits of RERA
RERA has a number of benefits for the buyer, the promoter, and the real estate agent. These include:

Standardization of carpet area: Before RERA the manner by which a builder calculated the price of a project was not defined. However, with RERA there is now a standard formula that is used to calculate carpet area. This way, promoters cannot provide inflated carpet areas to increase prices.
Reducing the risk of insolvency of the builder: Most promoters and developers tend to have multiple projects being developed at the same time. Earlier, developers were allowed to move funds raised from one project to that of another. This is not possible with RERA since 70% of the funds raised need to be deposited in a separate bank account. These funds can be withdrawn only after certification by an engineer, a chartered accountant, and an architect.
Advance payment: As per the rules, a builder cannot take more than 10% of the cost of the project from the buyer as advance or application fees. This saves the buyer from having to source funds fast and having to pay a large amount.
Rights to the buyer in case of any defects: Within 5 years of possession, if there is any structural defects or problems in quality, the builder has to rectify these damages within 30 days at no cost to the buyer.
Interest to be paid in case of default: Prior to RERA, if the promoter delayed possession of the property, the interest paid to the buyer was much lower than if the buyer delayed payments to the promoter. This has changed with RERA and both parties have to pay the same amount of interest.
Buyers rights in case of false promises: If there is a mismatch in terms of what was promised by the builder and what has been delivered, the buyer is entitled to a full refund of the amount that was paid as advance. At times, the builder may have to provide interest on the amount as well.
If defect in title: If at the time of possession, the buyer discovers that there is a defect in the title of the property, the buyer can claim compensation from the promotor. There is no limit to this amount.
Right to information: The buyer has the right to know all the information about the project. This includes plans related to layout, execution, and completion status.
Grievance Redressal: If the buyer, the promoter, or the agent has any complaints with respect to the project, they can file a complaint with RERA. If they aren’t pleased with RERA decision, a complaint can also be filed with the Appellate Tribunal.
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. Below are the few impacts:

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.