The real estate market is also an increasingly millennial market. Millennials now constitute the largest demographic of homebuyers, though they’re still not
What is RERA or Real Estate (Regulation and Development) Act of 2016? How does it affect the Real Estate industry in India?
The Government of India enacted the Real Estate (Regulation and Development) Act 2016 and the provisions of it came into effect from May 1, 2017. The developers were given time till the end of July 2017 to get their projects registered under RERA with the help of a .
The real estate sector.(RERA) is an Act passed by the Indian Parliament. The RERA seeks to protect the interests of home buyers and also boost investments in the
Prior to the implementation of the Act, the home buyers had a complaint that the real estate laws are in favour of the builders and using that the builders are exploiting them. Considering such situations, RERA aimed to create a more equitable and fair transaction between the seller and the buyers of the property, especially in the primary market.
RERA concentrated on making the real estate purchase simpler by bringing in better accountability and transparency in the system. It prescribed that the states must not dilute the provisions and the spirit of the central Act.
Now, the buyers who feel cheated on or harassed by the builder, they can approach a Real Estate industry its first regulator.and take the matter to the RERA authority. RERA is giving the Indian
The State Government, as well as the Union Government, is responsible to make regulations which control the relationship between the buyer and the builder. These are done to protect the interest of the home buyers. There are certain impacts on the home buyers, which the builders are bound to follow such as:
- 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, subcontractors.
- 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 a majority of units have been sold.
According to the central act, every real estate project, where the total area to be developed exceeds 500 sq meters or is more than 8 apartments are proposed to be developed in any phase, must be registered with its respective state’s RERA.
Existing projects where the completion certificate (CC) or occupancy certificate (OC) has not been issued, are also required to comply with the registration requirements under the Act.
While applying for registration, promoters are required to provide detailed information on the project e.g. land status, details of the promoter, approvals, schedule of completion, etc. Only when registration is complete and other approvals (construction related) are in place, the project can be marketed.
Initially, a lot of work is to be done to get the existing and new project registered. Details such as the status of each project executed in the last 5 years, promoter details, detailed execution plans, etc., needs to be prepared.
With the advent of RERA, specialised forums such as the State Real Estate Regulatory Authority and the Real Estate Appellate Tribunal will be established for the resolution of disputes pertaining to home buying and the aggrieved party will have no recourse to other consumer forums and civil courts, on such matters.
While the RERA sets the groundwork for fast-tracking dispute resolution, the litmus test for its success, will depend on the timely setting up of these new dispute resolution bodies and how these disputes are resolved expeditiously with a degree of finality.
One of the primary reasons for delay of projects was that funds collected from one project would invariably be diverted to fund new, different projects. To prevent such a diversion, promoters are now required to park 70% of all project receivables into a separate reserve account. The proceeds of such account can only be used towards land and construction expenses and will be required to be certified by a professional.
The absence of a proper regulator (like the Securities Exchange Board of India for the capital markets) in the real estate sector, was long felt. The Act establishes Real Estate Regulatory Authority in each state and union territory.
Its functions include protection of the interests of the stakeholders, accumulating data at a designated repository and creating a robust grievance redressal system. To prevent time lags, the authority has been mandated to dispose of applications within a maximum period of 60 days; and the same may be extended only if a reason is recorded for the delay. Further, the Real Estate Appellate Authority (REAT) shall be the appropriate forum for appeals.
After the implementation of the Act, home buyers will be able to monitor the progress of the project on the RERA website since promoters will be required to make periodic submissions to the regulator regarding the progress of the project. In case, the promoter fails to do so, is liable to pay compensation if the buyer faces any monetary loss due to that.
The builders are now required to make a positive warranty on his right title and interest on the land, which can be used later against him by the home buyer, should any title defect be discovered. Additionally, they are required to obtain insurance against the title and construction of the projects, proceeds of which shall go to the allottee upon execution of the agreement of sale.
The Act prescribes a standard model sale agreement to be entered into between promoters and homebuyers. Typically, promoters insert punitive clauses against home buyers which penalised them for any default while similar defaults by the promoter attracted negligible or no penalty. Such penal clauses could well be a thing of the past and homebuyers can look forward to more balanced agreements in the future.
To ensure that violation of the Act is not taken lightly, stiff monetary penalty (up to 10% of the project cost) and imprisonment has been prescribed against violators.
Whether you are are a buyer or a builder, if you need any help whether in the registration or have an issue regarding property which is not being addressed properly, you can contact, a legal-tech facilitator providing you with the best legal services in India. They not only connect you to the best suitable lawyers but also guide you throughout the case.
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