On the 8th of November, 2016, the Hon. Prime Minister of the country, Narendra Modi began announcing the major processes that transformed the Indian Tax Reform system forever.
He propelled the Demonetization Drive, introduced the game-changing GST (Goods & Services Tax) and shook up the entire real estate sector with the Real Estate Regulations and Development Act (also called the RERA Act).
The Real Estate Sector being a major vehicle in the economic growth of the country, it is vital to understand how this RERA Act is impacting the industry, the developers, the home buyers and so on a daily basis.
Here are answers to a few of the asked questions about RERA that could help you learn everything you need to know about the Act.
What is RERA?
RERA or the Real Estate Regulations and Development Act was introduced by the Central Government on May 1st, 2017. It is an Act whereby all states and UTs are expected to follow suit with all the central regulations, along with a few iterations that the states are allowed to make.
How will RERA help?
Through this act, all the responsibilities of each of the players in real estate, such as developers, home buyers, government, brokers, agents, contractors, etc will become clear. It will help in keeping track of all real estate projects, and even find out on whose court the ball is stuck. It will also, of course, result in security, fair utilization of the customers’ money and timely completion.
What does it mandate?
It mandates the setting up of a Real Estate Regulatory Authority (RERA), something like TRAI, which will have powers to regulate the sector and improve its functioning from time-to-time as per prevailing conditions.
What is an Escrow Account?
The Escrow Account is an account whereby the act compels the developer to deposit 70% of the total amount he has collected from his home buyers to be utilized for the completion of that project alone, and not to be used to pay for some new land or to complete some other project. This inspires greater transparency and quashes possibilities of malpractices.
If my developer is making false promises through his advertising, but in reality, a whole bunch of work is still left, can the Act help my case?
According to Section 3 (1) of the Act, now the government has prohibited all real estate developers from issuing advertisements of their ongoing or future projects without registration with the real estate regulator. No developer or promoter must advertise, market, book, sell, offer for sale or even invite anyone to purchase in any manner any plot, apartment or building without registering the project with the Real Estate Regulatory Authority established under the Act. However, if the developer’s project has already obtained completion or occupancy certificates, those can continue to be advertised and sold.
If I have bought an apartment in a project that is under construction and scheduled to be delivered within a year, will my project fall under RERA even if it was initiated before the Act?
Yes, all ongoing and new projects fall under Real Estate Regulatory Authority (RERA). They need to register with the Authority of RERA and follow all regulations thereof. This applies to both residential as well as commercial projects.
If my project has already received the Completion Certificate (CC) or Occupancy Certificate (OC), what impact will the Act have on me?
If your project has already received its completion certificate (CC) from the local authorities certifying that the constructed project meets the approved plans as submitted with them prior to implementation of the RERA Act by the State/Union territory government where the project is located, no registration is required with the Authority and the project will be out of the purview of the Act. The same also applies if your project has been granted the Occupancy Certificate (OC) prior to the Authority getting set up, as the OC is given only after the CC.
If I wish to rent out my apartment, would I fall under the Act?
No, rentals are outside the purview of the Act.
If my developer had promised to deliver my project on a certain date, but still hasn’t given me possession even a year after, can the Act help me in any way?
According to the Act, Developers are meant to submit project timelines as agreed between buyers and themselves and expected to adhere to their end of the agreement. If the developer goes back on his word and causes delay, he will have to compensate the buyer (as per the AOS). At the same time, the buyer will also need to pay penalty if he makes delayed payments (as per the agreed payment schedule or as mentioned in the AOS).
If I want an update on the plans, approvals, timelines, on-site progress etc for my project, can the Act help me procure that from my developer?
With RERA, now any home buyer can check all the details related to his project, including plans, approvals, timelines, names of contractors, number of units and also disclosure about areas (including common areas, carpet area and others) on the developer’s website/portal. Developers also need to share regular updates on the progress of the project for greater transparency. It is the responsibility of a home buyer, however, to do their due diligence on the project via the portal.
The developer from whom I purchased my apartment, has sold the project to another developer, with plenty of work still remaining to be done on the project. As a customer, how can I change my situation with the help of RERA?
The Act has considered such a scenario where the developer is unable to complete the project and sells it to another developer midway. Post the Act, the developer cannot take such a decision, without the consent of at least 2/3rd of the project’s customers as well as approval from RERA.
Conclusion:
This is a great time to become a home buyer. RERA has come up with a number of provisions and solutions, which will benefit both home buyers as well as reputed developers. Also along with demonetization, it will put all the malpractitioners out of business. Add to this, the recent reduction in home loan rates by major banks and housing finance companies; which provides a unique financial incentive for home buyers. Hope these answers help you understand the Act better. If you have any further questions that we may have missed, feel free to reach us, and we will try to answer them to the best of our ability.
