The Real Estate (Regulation and Development) Act, 2016 (RERA) will finally give India’s real estate sector its first regulator from Monday, May 1, 2016. The act was passed by parliament last year and the Union Ministry of Housing and Urban Poverty Alleviation had given time till May 1, 2017, to formulate and notify rules for the functioning of the regulator.
RERA seeks to bring clarity and fair practices that would protect the interests of buyers and also impose penalties on errant builders.
So what is RERA? Here is a look at the real estate regulator and how it will impact the real estate market.
According to RERA, each state and Union territory will have its own regulator and set of rules to govern the functioning of the regulator. Centre has drafted the rules for Union territories including the national Capital. While many states are still behind on schedule for notification of RERA rules, many have notified rules and a regulator will start functioning. Some of these states are Haryana, Uttar Pradesh and Maharashtra.
RERA seeks to address issues like delays, price, quality of construction, title and other changes.
Delays in projects are the biggest issue faced by buyers. The reasons are many and the impact is huge. Since the last 10 years, many projects have seen delays of up to 7 years. Projects launched after the turn of this decade have faced delays as well. Some have run into obstacles even before a brick was laid. The reasons include diversion of funds to other projects, changes in regulations by authorities, the environment ministry, national green tribunal etc and other bodies like those involved in infrastructure development and governing transport. In many places, land acquisition becomes an issue. Errant builders often sell projects to investors without the approval of plans, unauthorised increase in FAR, bad quality of construction, projects stuck in litigation etc.
Rera for Buyers
RERA has set up some fundamental functions for the buyers which are laid upon as their rights.
- A buyer is entitled to know all the plans of a real estate project in detail. He has the right to know the stage-wise completion of the project which includes the amenities as well.
- A buyer is entitled to claim a written possession of his house and the common areas which he is entitled to as a member of the project. He has the right to get all the documents regarding the project.
- A buyer has to pay the amount he has signed the agreement in the court. He will have to pay interests if he delays the payment. However, a promoter has to pay the same interest to the buyer if he delays his project or if he has not been able to provide what was said in the agreement.
- The buyer should participate in forming an association after taking the physical possession of his house. He should also be active on the website of RERA India so that the flow of information can be maintained. His participation towards the deed of the apartment can be beneficial for other buyers.
Moreover, the establishment of RERA with those of Central Advisory Council and the Real Estate Appellate Tribunal will work to enhance the real estate market of India, bring the buyer confidence back and penalise those promoters and real estate agents who work unethically.
RERA for Real Estate Agents
In this Real Estate Regulatory Notification, the government has given a set of functions and duties to the real estate agents which can help the buyers in purchasing properties and in matters related to that.
• The agent should keep and maintain all the records, accounts and documents of a real estate project he has been indulged with. He should also keep a background check of a builder in order to make a buyer safe.
• He should abandon all the fraudulent behaviour related in buying or selling a real estate project. He should not give false or misleading information to a buyer about a project and should not represent himself as a promoter and approve to things of which the real promoter does not approve of.
• As per the RERA bill, a person or an organization working as a real estate agent should not advertise the services which are not a part of the project.
• He must provide all the documents related to booking, account, and registration which a buyer must have while buying a plot or a house.
After knowing these important and must follow aspects of Real Estate Regulatory Act 2016 RERA, a buyer should be able to deal in the purchase and selling off his property quite easily. While buying a property, he must ask an agent to show his registration with the Authority as this will make a buyer stress-free and confident that if any wrong happens, then they can approach the Authority. This will also make an agent to feel proud of his work as the image of real estate agents in India is not good today, but it is of great importance that they get a feel-good response from the public as it will help in the overall flow of money in the right direction. This can only happen is the agent obliges to all these guidelines and duties which are made for them in this RERA bill.
RERA for Promoters
Promoters are the builders or the developers who builds apartment buildings and sell those to home seekers.
Following are the guidelines that are set up by RERA for the promoters.
Registration –
- The rules under RERA says that all the real estate projects, whether commercial, residential or under construction projects have to be registered with RERA under three months of its implementation. While applying for the registration, the promoter shall give a copy of ownership of land, every small detail of the project that has been planned, schedule of the construction, status of land, pro forma agreements and the information of all the real estate agents, contractors, engineers etc.
- The Authority understands that the government is also a culprit in the real estate scams, as their late approval of plans delays a project or its development. This further discourages a promoter and he uses immoral practices. Real Estate Regulatory Agency has given strict guiding principle to RERA that it must register or reject an application within a month. If a project gets rejected, RERA is answerable to the promoter that on what basis his project has been cancelled. If these two things are not met by the government, the promoter’s project will automatically be registered with RERA.
- RERA has the power to cancel the registration of a project if it finds any wrongdoing by the promoter regarding anything.
Changes to the registered plan – If a plan has been registered under RERA, it can only be changed with the consent of two-third buyers of that project. This will help the Authority and the buyers to tackle the problems arising due to the consistent change of plans by a promoter even if the buyer has signed an agreement with a particular plan and layout of the project.
Public Portal – If the project gets registered, then the promoter will be provided a login ID and password so that he can upload all the details of the real estate project along with his photograph on the RERA India’s website. This will be done so that a buyer can access to all the necessary details that he should know before signing the agreement. A promoter cannot advertise a project until it gets registered. Also, the website will contain the list of defaulters so that a buyer can beware of them.
Finishing the misuse of funds – Many times it happens that a builder uses the money he gets from a project to invest it in another project without finishing the previous one first. Doing this, a promoter draws himself into a web created by his owning doings and this leads to major problems for the buyers. Thus, to end this greed of some promoters, RERA has made some rules. Now, a separate account would be made in the name of the project. Leaving a minimum fund of 50% which a promoter gets through a project’s sale is mandatory. This will ensure that even if the promoter faces losses in other deals, he will have money to construct that project.
Functions and Duties of a Promoter – RERA has given certain functions of a promoter that he must do for a buyer. These include the details of a project’s registration, updates on projects, information about actions of a promoter regarding the project etc. A promoter has to take care of the services he provides and will have to guide a society until the society makes a local authority. The promoter shall also provide completion or occupancy certificate from a local governing body. The promoter cannot transfer the real estate project without a consent of two-third buyers of that project and without the prior approval of the Authority. A promoter has to refund and return the entire amount if he fails to deliver a project.
All these provisions are made so that a buyer can feel safe while getting a home. The laws under RERA that have been made for the promoters are not very strict if one sees them clearly and understands how a community should work. These rules are very basic in nature. Real Estate is not a difficult thing to understand, rather it had been made difficult with unfair practices in the past. We hope to see a positive response from the promoters.
RERA for Developers
For escalating the accountability and the responsibility towards consumers, RERA has made it mandatory for real estate promoters or real estate developers to register all those projects that measure above 500 square meters or over a total of eight apartments. RERA has also mandated that all real estate developers need to get a valid registration number prior to making any proceedings. The real estate developers will not be allowed to advertise and market or sell the apartments without registration. For projects being developed in phases, it is necessary for the developers to get each phase registered separately.
It is essential for the promoter or the developer to submit all the important documents regarding the projects as agreed by RERA. RERA has further made it an obligation for the real estate developers to open escrow accounts in government-recognized banks. The developers must also make a deposit of 70% of the total amount that the get from the consumers. The developer has the flexibility of withdrawing this amount but he or she needs to use it solely for the purpose of developing a certain project post getting approval from an architect, chartered accountant or engineer.
Some suggestions or advice for real estate promoters from RERA:
• Carry out a background check of the land and the seller prior to purchasing a plot.
• Prior to planning a certain project, carry out a market study, risk analysis, financial study and profit and cost analysis.
• Take the services of a reliable investing company or investor and remain updated about the trending stakes for getting the best financial deals.
• Hire competitive professionals like property specialist accountants, sales executives, architects, contractors, surveyors, engineers and more.
• Get the services of a reputable and trustworthy project management firm or project engineer for guiding you in project development.
• Get all important sanctions, NOCs and approvals in order to remain on the safe side of things.
• Carry out a survey on upcoming properties, existing properties and the projects and prices of the competitors. It is also important to survey the region where you will be developing the project.
• Set the right price for your project and hire reputable real estate professionals for top class marketing of the property.
• Come up with a good floor plan and also share all the important details with the buyers.
• Avoid diverting the funds that you receive for the project in question. This will delay your project and will also spoil your reputation in the market.
• Do not make false promises. Fulfill whatever you claimed while selling the units.
