For residential real estate agents, becoming established as a local authority is the best way to develop business throughout the community. The concept is a
What is RERA? What are it’s salient features? How does it protect the buyers and what is the difference in scenario before and after it?
The Real Estate (Regulation and Development) Act, 2016 (RERA) basically acts as the regulator of India’s real estate sector. 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.
The RERA is expected to bring in transparency and accountability in the real estate sector and ensures the customers are not cheated upon or riden by the false promises of the developers. It also seeks at the timely delivery and endures that the customers need not have to deal with the late deliveries.
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.
To provide clarity to buyers, developers will have to keep them informed of their other ongoing projects.
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 from allottees, how the funds were utilised, the timeline for construction, completion, and delivery that will need to be certified by an Engineer/Architect/practicing Chartered Accountant.
It will be the responsibility of each state regulator to register real estate projects and real estate agents operating in their state under RERA. The details of all registered projects will be put up on a website for public access.
RERA talks about the quality of construction in projects. Over the last few years, buyers have protested about poor of flats. 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 in quality of construction and the provision of services, the developer will have to rectify the same in a matter of 30 days.
Developers can’t invite, advertise, sell, offer, market or book any plot, apartment, house, building, investment in projects, without first registering it with the regulatory authority. Furthermore, after registration, all the advertisement inviting investment will have to bear the unique RERA registration number. The registration no. 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 RERA.
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 for the builder on the regulatory authority’s website. The developer will be given login credentials using which it will upload all the information regarding the registered projects on the 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, 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.
Change in Scenario:
Now, the builders, developers and promoters cannot advertise/promote any project, without quoting a RERA registration number and website address of RERA, after three months. If they fail to register post this period, they cannot continue with marketing and selling their projects.
With RERA, since the builders have to get all the necessary clearances before they could sell the project, malpractices in that regard is expected to be curbed.
Further, the customers who are looking at purchasing an ongoing project or a project that is yet to be registered will be ensured better protection under RERA because the terms of project delivery will be as per the Act.
Pricing will be impacted with both GST and RERA becoming effective but may take six to 12 months to pan out. The homebuyer will have to pay only for the carpet area, that is the area within walls, and the builder cannot charge for the super built-up area the way it has been in existence before.
The same report said that the developer will have to transfer 70 per cent of the money received from customers to an escrow account. This will ensure the builder does not spend the money on other projects since they can withdraw money from this account after approvals from engineers and chartered accountants they appoint.
Also, one great change will be that the builder will have to give a warranty for any structural defect in the building for the time span of first 5 years. In case of some structural defect or poor quality, the developer is responsible to rectify any such defect.
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