The Real Estate (Regulation & Development) Act, 2016, came into force on 1 may 2017. RERA seeks to bring clarity & fair practices that would protect the interests of buyers & also impose penalties on errant builders. Issues like delays, price, quality of construction & title are also easily resolved with clauses in RERA.
The Act requires developers to get all ongoing as well as under-construction projects that have not received completion certificate, registered with regulatory authorities within 3 months, i.e., by end of July. Projects with plot size of a minimum 500 sq.mt or eight apartments need to be registered with regulatory authorities.
Applicability : RERA is applicable only to those on-going projects which have not received the completion certificates before commencement of The Act i.e., 1 May, 2017. They need to get registration done on or before 1 July 2017.
Therefore, all projects which have not got completion certificate before 01/05/2017 will be deemed ongoing & will have to be registered.
Key provisions of RERA ;
- The promoter of a real estate development firm has to maintain a separate escrow account for each of their projects. A minimum 70% of the money from investors / buyers will have to be deposited. This money can only be used for construction of the project & the cost borne towards the land. To provide clarity to buyers, developers will have to keep them informed of their ongoing projects.
- RERA requires builders to submit those original approved plans for their ongoing projects and alterations that they made later. They also have to furnish details of revenue collected from allottees, how the funds were utilised , the timeline for construction, completion & delivery that will need to be certified by an Engineer/Architect/practicing Chartered Accountant.
- The regulator will ensure protection the buyers in matters of poor quality construction & provision of service for 5 years from the date of possession. If any issue is highlighted by the buyer, the developer has to rectify the same within 30 days of the grevience raised.
- Developers can’t invite, advertise, offer, market or book any plot, apartment, house, building, investment in projects, without first registering with the regulatory authority.
- If the promoter defaults on delivery within agreed deadline, they will require to return the entire money invested by the buyers along with the pre-agreed interest rate mentioned in the contract based on the model contact given by RERA. If the buyer chooses not to take the money back, the builder will have to pay monthly interest on each delayed month to the buyer till they get delivery.
- Too add further security to buyers, RERA mandates that developers can’t ask more than 10 % of the property’s cost as an advanced payment booking amount before actually signing a registered sale agreement.
- Where no contractual rate of interest is mutually agreed upon between the promoter & the allottee, the interest rate payable by the promoter to the allottee or vice versa as the case may be shall be the rate which is prevalent as per existing directives of RBI i.e., MCLR the SBI PLR + 2%.
- The interest payable by the promoter to the allottee shall be from the date the promoter received the amount or nay part thereof till the amount or part thereof & interest Theron is refunded, & the interest payable by the allottee to the promoter shall be from the date the allottee defaults in payment to the promoter, till the date it is paid.
- The Act has mandated real estate developers to specify ‘carpet area’s’ rather than ‘super built up area’s for ease of comparison between multiple projects.
Suggestions to a homebuyer: As a homebuyer
, you must remember that a developer can offer possession only after the completion certificate has been obtained. Once that happens, the developer can apply for various utilities such as water & electricity.
If you are buying a house or have bought one, also insist on getting a copy of the clearance certificate before you take possession.
Exceptions to this Act : All those on-going real estate projects whose proposed land to be developed does not exceed 500 sq meters or 8 flats, inclusive of all the phases are exempt from the provisions of The ACT.
DISCLAIMER I : No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. As SME issues have entry barriers and having low preference from broking community, any reader taking decisions based on any information published here does so entirely at own risk. Above information is based on information available as on date coupled with market perceptions. Author has no plans to invest in this offer.
DISCLAIMER II : Notwithstanding any opinions my views are speculative in nature which bares me to be a guarantor of 100 % accuracy with regards to future trend prediction & pricing targets