The advent of RERA or Real Estate Regulatory Authority Act is like the boon for both the real estate investors and developers for a variety of reasons. This is the act which is imposed not only to bring in transparency and clarity, but also to ensure the highest security of the developers and buyers. So, if you are planning to invest in any real estate property or want to book a home, then it is essential that you must know about RERA and its important aspects so that you can make most out of the real estate investments.
What is RERA Act?
RERA Act was launched in 1st of May 2017 and this act was passed by the cabinet to deliver a mechanism which can regulate and address the issues efficiently like quality of construction, delays in project delivery, property pricing, titles and other changes in transparent way. The prime focus of the RERA Act in selling real estate projects in India by builders is to protect the interest of the investors in real estate sector and to develop a robust mechanism for faster dispute settlements. Under this act, it is necessary for all the commercial and residential developments, with land coverage of 500 sq. m or above eight apartments, to register with the RERA and get certification for the same.
All on-going projects which have not yet received the certificate from local municipal body on commencement date of the act need to apply and register with RERA within 3 months. The application of the developers can either be approved or rejected by the authority within 30 days of registration. There is a single registration number for every State and Union Territory and developers are required to show the RERA number during every sale made. Upon successful registration with RERA, the developer would get a registration number along with a login ID and Password.
How RERA Act Protects Buyers of Real Estate Property?
RERA is the central law and real estate projects are the state subjects. Still RERA is implemented and conducted by the respective state governments. All union territories and states would have state level regulatory authorities called RA. These state level RAs are authorized to create the rules and regulations in adherence to the central RERA Law. Below is the list of some crucial provisions in RERA to protect the interest and rights of real estate investors and buyers in India.
- Affidavit – Apart from all essential documentation and information, the developers or builders are required to provide a written declaration to buyers which must be supported by a legal affidavit. It would comprise all information of the project including timeline and specific phase of the project development.
- Date of Possession – The delivery date of the project is the choice of the builder and it has to be adhered by both buyers and developers. The delivery date of the project varies amongst different builders, but the sale agreement must comprise the specific date of possession and the rate of interest which builder would pay off in case of delayed delivery.
- Clear Title of Land – The affidavit also comprise the title clearance confirmation of land on which the development is going on and to support it relevant documents must be provided. This prevents land dispute which may unnecessarily delay construction and possession.
- Maintaining Separate Escrow Account – Developers are now required to create their separate escrow account where they need to deposit 70% of the total amount of the project received from buyers and it must be maintained by the scheduled banks. Withdrawals from the account are on the basis of completion of the project and developers are allowed to withdraw only the amount to cover the construction and buying the land. Moreover, the project needs to have certification from architect, engineer and chartered accountant along with 6 months audit report. This is done to prevent the diversion of frauds received from buyers.
- Making Legal Offences – If the developer or the builder fails to work in adherence to the rules and regulations set by RERA Act, then it would be considered as the illegal activity and the authorities would deal with it accordingly. This has been seen at many places like gurgaon, pune, noida and many other cities. E.g if a builder is launching affordable housing project in gurgaon, it should be HRERA compliant to avoid any kind of penalties and other problems from the authority. Some of the legal actions which are taken against the builders for unlawful activities include: termination of the registration of project, compensation to buyers in event of delayed delivery, imprisonment for a term which may increase up to 3 years, penalty which may extend up to 10% of the estimated total cost of the project, imprisonment and penalty.
- Creating RERA Appellate Tribunal – Expert communities and state level courts are setup across the nation and these would work as tribunal and required to pass judgment on any case or issue within the timeframe of 60 days. This will help the state level RERAs or RAs to efficiently regulate the transactions and ensure timely delivery and possession of the projects.
RERAs across the nation are focused on reviving the confidence levels of consumers in over supplied and over priced real estate market.