RERA — The Real Estate Game Changer
It is no secret that the real estate sector in India has historically been plagued with corruption, unfair practices, a lack of transparency and an overall absence of rule of law. Stories of misleading advertisements, delayed possession of flats and poor quality construction are frequently recounted as cautionary tales to potential property buyers. All this could now change. With the Real Estate (Regulation and Development) Act, 2016 — RERA — the government has finally stepped into the sector as the common man’s champion.
In effect since 1st May 2017, RERA requires each State and Union Territory to establish individual Regulators and Appellate Tribunals. These regulatory authorities are to bring about transparency and ensure better trade practices in the sector.
Here’s a quick look at how this Act will change the landscape of the real estate sector in India:
1. Registration of projects: All housing projects now need to be registered with their respective State Regulators. It is mandatory for developers to submit clear and concise information regarding details of promoters, layout plans, area covered, expected date of completion, total costs and the status of approvals and land rights to their State Regulator. After scrutiny, these projects will be provided a registration number and clearly listed on the Regulator’s official website. No developer is authorised to buy, sell or even advertise real estate properties without the registration number.
2. Transparency of information: The builders are required to clearly mention the carpet area of the property involved. The common areas or parking spaces need to be mentioned separately, if present. This would curtail deliberately confusing advertising about the size of the house. All advertisements are also required to clearly display the property’s registration number.
3. Dedicated allocation of funds: 70% of the funds received from buyers will have to be deposited in a separate account by the housing developer. These funds can only be used in the construction and land costs of the property purchased and not diverted for use in other properties being built by the same developer. Additionally, all developers will also have to disclose the list of all their on-going projects for perusal by the buyers.
4. Protection from delays in delivery: If the builder is unable to handover the possession of the property to the buyer by the date mentioned in the contract, then he is required to return the total amount along with interest rates- equal to those mentioned in the contract. If the buyer is unwilling to withdraw from the purchase of the property then he is entitled to monthly interest payments from the builder, until possession of the property.
5. Protection from unexpected layout changes: Housing developers are prohibited from altering the house layout plans until they have written permission from at least two-thirds of the buyers to make the change.
6. Protection from defective construction: The RERA states that in case of defect in construction or workmanship of the property, up to 5 years after possession, the developer is required by law to fix it within 30 days of the complaint, without any additional charges.
7. Speedy grievance redressal: To address grievances related to real estate matters, every state shall have its own ‘Real Estate Appellate Tribunal’ which would aim to settle disputes with a fast track mechanism.
Impact on the Industry
RERA is the biggest step so far towards the formalization of one of India’s most opaque and unorganized sectors. Traditionally buyers have been at the mercy of developers, but with the proper implementation of RERA, the behaviour of the market could witness a flip in roles, with buyers being put in the driver’s seat.
Regulation of developers and projects by the Act will also allow real estate service providers to focus their efforts in creating consumer focused products and services that have long been overdue. This could lead to a boost in demand and benefit all stakeholders in the industry.
Overall, while the Act is a giant leap in the right direction, it remains to be seen how each state handles its implementation. Some states have already begun to water down the act by subjectively interpreting its components. One can only hope that good sense prevails and states interpret it in accordance with its original intention.
The Customer is king, and that’s the way it should be.