RERA in 12 Points: A Must Checklist for Real Estate Investors
While it always involved humongous sums of money, and a fair amount of paperwork, for some reasons the real estate sector in India was largely unregulated, and highly in favour of builders and developers. So much so, that a large number of home buyers consistently faced pressing issues such as delayed possession of apartments, loss of money due to project cancellation, loss of property rights due to lack of government approvals and so on. Some developers even went to the extent of cheating buyers with false information, not filling up the date of possession clause in the agreement, and even diverting the funds collected for the project completion to some other purpose.
Besides, there was no regulatory body to hear out and resolve the grievances of home buyers, and going to court was largely a stretched out process that would take years. Unfortunately, for some buyers it meant paying off Home Loans, even without being able to get a chance to enjoy their new residence.
Much to the relief of home buyers and small investors, the Real Estate Regulatory Act, popularly known as RERA was introduced in the year 2016. The act not only offers numerous rights to home buyers but also tightens the grip on real estate developers and agents by bringing in simple yet noteworthy guidelines. For instance, after the introduction of the Act, it is now mandatory for all agents to be registered under RERA, before selling or even marketing any property.
Similarly, there are 12 other rules of prominence which should be known to real estate investors before they indulge in the purchase or sale of any property. These are –
1. Project Registration with RERA
For any real estate project comprising of a land area greater than 500 square metres (approx., 5,380 square feet) or 8 apartments, it is now compulsory to get registered with RERA before the launch. This is applicable for both, commercial as well as residential projects. This has been brought into order, with the aim of offering enhanced transparency to the customers.
While registering the project the builder needs to furnish the following details:
- Sanctioned Plan
- Project Layout
- The Location of the Project
- Carpet Area
- Number and Area of Garage
A home buyer can, therefore, cross-check on the official website of RERA if the real estate project that they want to invest in has been registered or not. In case any unregistered project is being marketed or put up for sale, the same can be reported.
2. Updates on Construction Status
RERA mandates all real estate developers and builders to update the details of their projects on a quarterly basis. These updates must include crucial information such as:
- Number and Types of Units Sold Out
- Government Approval Taken or Approval Pending List
- Completion Schedule
- Documents Pertaining to Litigation Proceedings (If any)
This has been done to enable the home buyers to stay updated on the progress of the construction and other related details.
3. Escrow Account Transfers
RERA mandates all real estate builders and developers to transfer 70% of the amount received from customers to a dedicated escrow account. This money can only be accessed by the developers once they receive the due approvals from CAs and Project Engineers. This rule ensures that the home buyers’ money is safe, and is not being used for any other purpose than intended.
4. Standardisation of Sale Agreement
RERA mandates the use of a standard model sale agreement which should be entered between builder/ promoter of the project and the home buyer. This step has been taken as a way to protect home buyers from any defaults in the agreement and to bring the promoters and buyers on the same platform as far as penalties and other charges are concerned.
The standard agreement must furnish various details, including but not limited to:
- Specification of Building and Apartments
- Internal and External Development Works
- Date Of Possession
5. Limit on Advance Payment
After the introduction of RERA, a builder or promoter can no longer demand an advance payment exceeding 10% of the estimated cost of project. If they wish to chare a higher amount of money, they must enter into a formal agreement with the buyer, and duly register the property.
6. Defect Liability Period
RERA dictates that it is the responsibility of the developer in case of any structural defects in the property or issues caused due to use of poor quality materials. Hence, a home buyer can now hold the developer liable in case of any such problems faced during the period of first 5 years, and the developer has to either pay for the repairs or compensate the same, whichever is feasible.
7. Carpet Area Specification
Contrary to the past practices where developers used to sway home buyers by stating the built-up or super built-up areas, developers are now required to specify the carpet area of the house i.e. the area within the four walls such as living/drawing room, bedroom, kitchen, toilets, etc. This is done to increase the transparency from the purview of the home buyers.
8. Title Representation
RERA mandates promoters to disclose the clear title of the project and the property. This is a crucial step that has been taken to protect the interest of home buyers. In case of any discrepancy found in the property title, the investor can ask for a compensation of which there is no upper limit.
9. Repercussion for False Information
In case the builder or developer takes an advance payment from the home buyer on the basis of the false advertisement or wrong information, then the home buyer has the option to ask for a full refund. In case, the home buyer still wishes to purchase the property, the builder would need to pay a penalty ranging up to 5% of the property’s cost.
10. A penalty against Failure to Offer Timely Possession
As per RERA, if the builder fails to offer possession of the property as agreed upon, the home buyer can leave the agreement, in which case the builder would need to refund the entire amount. If, however, the home buyer wishes to continue with the project, the builder must pay monthly interest on the amount received, until they give possession. This can, to some extent, help home buyers to meet their Home Loan commitments, without additional financial strain. Needless to say, it is quite a relief considering the present day Home Loan Interest Rates.
11. Alteration in Sanctioned Plans
If the builder wishes to alter any specifications in the said property/ apartment, they can only do so if the buyer approves of the same. On the other hand, if any alterations need to be made in the entire project or any common areas of the project the builder needs the approval of at least 2/3rd of the total buyers of the project.
12. Grievance Redressal
In case of any complaints or grievances of the home buyer with respect to the property, they can raise a complaint with RERA. It is the onus of the state’s real state regulatory department to resolve the issue within 2 months. If, however, the home buyer is not satisfied with the proposed solution, they may approach the Appellate Tribunal, and consequently the High Court and the Supreme Court.
We hope that you are now aware of some of the prominent rules laid down under the Real Estate Regulatory Act!
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