What is RERA & its benefits?
What are the benefits of RERA?
If you have ever thought of buying a property or have already bought one, you must have heard about RERA — A term which is thrown in the air and tossed around but more often than not, you have no clue about what it is or how it works. So here we have some interesting facts and information that you should know before buying a property.
Before diving into the benefits of RERA let us first have a brief look at what RERA is and its salient features.
What is RERA?
The Real Estate (Regulation and Development) Act, 2016 (RERA) is an Act passed by the Indian Parliament. RERA seeks to protect the interests of home buyers and also boosts investments in the real estate sector.
The Rajya Sabha passed the RERA bill on March 10, 2016, followed by the Lok Sabha on March 15, 2016, and it came into force from May 1, 2016. 59 of its 92 sections were notified on May 1, 2016, and the remaining provisions came into force from May 1, 2017.
After reading all that, you must be wondering — but how did RERA actually do that? Well, RERA seeks to bring clarity and fair practices that would protect the interests of buyers and also impose penalties on errant builders.
Wait, why did we need RERA in the first place?
The amount of effort in terms of time, money, and manpower put in, to implement RERA has cost taxpayers a fortune. In a situation like this, one is bound to ask; why did we even need RERA? Well, here’s a simple answer to it.
For a long time, home buyers have complained that real estate transactions were lopsided and heavily in favour of the developers. RERA and the government’s model code, aims to create a more equitable and fair transaction between the seller and the buyer of properties, especially in the primary market.
RERA, it is hoped, will make real estate purchase simpler, by bringing in better accountability and transparency, provided that states do not dilute the provisions and the spirit of the central act.
RERA will give the Indian real estate industry its first regulator. The Real Estate Act makes it mandatory for each state and union territory, to form its own regulator and frame the rules that will govern the functioning of the regulator.
Benefits of RERA
RERA has a number of benefits for the buyer, the promoter, and the real estate agent. These include:
- Standardisation of carpet area: Before RERA, the manner by which a builder calculated the price of a project wasn’t defined. However, with RERA there is now a standard formula that is used to calculate the carpet area. This way, promoters cannot provide inflated carpet areas to increase prices.
- Reduces 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 of 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 of the promoter. This has changed with RERA and both parties have to pay the same amount of interest.
- Buyer’s 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 there is a defect in the 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 promoters. There is no limit to this amount.
- Right to information: The buyer has a complete right to 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’s decision, a complaint can also be filed with the Appellate Tribunal.
How will RERA impact homebuyers?
After reading all that, it all comes down to: How does it affect me? So, here is how the RERA act has an impact on the homebuyers.
Some of the important compliances that are covered under the RERA act are:
- Informing allottees about any minor addition or alteration
- Consent of 2/3rd allottees about any other addition or alteration
- No launch or advertisement before registration with RERA
- Consent of 2/3rd allottees for transferring majority rights to 3rd party
- Sharing information project plan, layout, government approvals, land title status, sub-contractors
- Increased assertion on the timely completion of projects and delivery to the consumer
- An increase in the quality of construction due to a defect liability period of five years
- Formation of RWA within a specified time or 3 months after the majority of units have been sold
RERA was launched by the government to tackle the many problems that a homebuyer faces. It was also developed to build accountability and transparency in the property industry.
Have you faced any property related issue? Or, have you ever filed for RERA? What are the types of problems you faced? Let us know in the comment section below!
(First posted on: https://www.myadvo.in/blog/benefits-of-rera/)