Real Estate contributes around 9% of the Gross Domestic Products (GDP) in India. It was a big relief for Indian home buyers, when the Real Estate Regulation Act 2016 came into existence effective 1st May 2017. It is an Act of Parliament of India that seeks to protect home buyers as well as improving investments in real estate. The bill was initially passed by Rajya Sabha on 10th March 2016 and by Lok Sabha on 15th March 2016.
The Real Estate Act makes it mandatory for all the commercial and residential projects, where the project is over 500 square meters/eight apartments to register with Real Estate Regulatory Authority (RERA). This is to bring transparency in projects with marketing and execution. If the projects were under construction and not received the completion certificate on the date of commencement of the Act, will need to seek registration within 3 months. Once registered, the promoter of the project will be provided with the login id and password to fill necessary details on the RERA Website (the website would be different for different states).
Real Estate Agents:
The Act is applicable for real estate agents as well. Agents who facilitate in selling or purchasing a property should obtain prior approval from RERA. Post registration, they will be given with the single registration number for each state or union territory. The registration number should be quoted by the agent during each transaction.
Failed to Register?
Now the question arises, what happens if the project is not registered with RERA. Well, RERA has all the authority to impose a penalty up to 10 percent of the project cost or the imprisonment up to 3 years.
What are the key provisions of RERA?
We have understood the registration process in RERA. Now, let’s look at the key provisions of the Act which is expected to bring transparency in the real estate industry. Here we go:
- Real estate developers and agents are to register in RERA by 30th July 2017. They would then come under the scope of Real Estate Act. So, buyer can very well confirm if they are buying the property with registered developers to ensure that they are protected by Law
- As we know, the rules are set up by the Central Government of India; however, the flexibility of modifying such rules are given to states
- The developer now have to deposit 70% of the money received from the buyer, in a separate bank account. This should be utilised only for the completion of relevant project within the timeline. The developer would face penalty (including imprisonment) if he fails to do so
- All the new projects should get prior approval from RERA before launch. This means, now developer can’t say that the approval is in the final stage and later postpone the project without specific timeline. The developer would be penalised for any false statement issued to the buyer on approval and timeline
- If developer wants to do any structural changes to the project launched, he would need the consent from at least 2/3rd buyers. If he fails to obtain the consensus from 2/3rd of total buyers, then he cannot make any structural change to the property
- The project details and construction progress updates should be updated in RERA website. If developer fails to meet the timeline, he might face that penalty from the authority
- In case of delay in possession due to the developer, he need to pay 2% interest above SBI lending rate to the buyer. The developer is also bound to rectify any defects in the property within 5 years of possession from the buyer
- We always used to hear from the developer about the built up area (carpet area plus the proportionate area of common areas) of the project. Now as per RERA, the developer should sell the projects only based on carpet area (the area enclosed within the walls)
So, it could be too much to learn; however, hope it was very informative. Real estate being one of the important and costliest investments, it is really important for us to keep in mind on how we can protect our investment.