Delay in projects being one of the main reasons leading to the foundation for introduction of the Real Estate (Regulation and Development) Act, 2016 (RERA) along with some other reasons such as, diversion of funds to other projects; changes in regulations by relevant authorities; sell projects to investors without approval of plans; bad quality of construction.
RERA is the first act of its kind which will act as real estate sector regulator. The act seeks to bring clarity and fair practices that would protect the interests of buyers and also impose penalties on errant builders. It also seeks to protect home-buyers as well as help boost investments in the real estate industry.
The RERA bill was passed by the Rajya Sabha on 10th March 2016 and by the Lok Sabha on 15th March 2016 which came into force w.e.f. from 1st May, 2016 with some provisions from 1st May, 2017. While many states are still behind on schedule for notification of RERA rules, many have notified rules and have appointed the regulator.
According to RERA, each state and Union territory will have its own real estate regulator which will regulate with the help of rules.
SOME KEY PROVISIONS:
- The RERA makes mandatory for all commercial and residential real estate projects to register with the Real Estate Regulatory Authority where the land is over 500 square metres, or eight apartments.
- In order to provide greater transparency, on-going projects which have not received completion certificate on the date of commencement of the RERA, will have to seek registration within 3 months.
- Application for registration must be either approved or rejected within a period of 30 days from the date of application by the Real Estate Regulatory Authority.
- On getting failed to register the project, penalty of up to 10 percent of the project cost or three years imprisonment may be imposed. It will be the responsibility of each state regulator to register real estate projects and real estate agents operating in their state under the RERA.
- The promoter of a real estate development firm has to maintain a separate escrow account for each of their projects. A minimum 70 per cent of the money from investors and buyers will have to be deposited. This money can only be used for the construction of the project and the cost borne towards the land.
- The RERA requires builders to submit the original approved plans for their ongoing projects and the alterations that they made later. They also have to furnish details of revenue collected, utilization of fund, timeline for construction, completion, and delivery that will need to be certified by an Engineer/Architect/practicing Chartered Accountant.
- The RERA also takes care of quality of construction in projects. The regulator will ensure protection to buyers in this matter for five years from the date of possession. If any issue is highlighted by buyers in front of the regulator in this period including quality of construction and the developer will have to rectify the same in a matter of 30 days.
- Without registering the projects with authority first, developers can’t invite, advertise, sell, offer, market or book any plot, apartment, house, building, investment in projects. Furthermore, after registration, in all advertisement of investment, will have to bear the unique registration number, which will be provided project-wise.
- After registering the project, developers will have to furnish details of their financial statements, legal title deed and supporting documents.
- If the promoter defaults on delivery within the agreed deadline, they will be required to return the entire money invested by the buyers along with the pre-agreed interest rate mentioned in the contract based on the model contract given by the Real Estate Regulatory Authority. However, if the buyer chooses not to take the money back, the builder will have to pay monthly interest on each delay month to the buyer till they get delivery.
- After developers register with the regulator, a page will be created on regulatory authority’s which will provide developers login credentials using which, complete information regarding the registered projects can be uploaded on regulator’s website. The number, type of apartments, plots and projects and their completion status will be updated at a maximum quarterly basis.
- To add further security to buyers, the RERA mandates that developers can’t ask more than 10 per cent of the property’s cost as an advanced payment booking amount before actually signing a registered sale agreement.
- The regulator will have the power to fine and imprison errant builders based on a case by case basis. The imprisonment can go up to a period of three years for a project.