Property Purchase FAQ
What is RERA Act?
The Real Estate
(Regulation and Development) Act, 2016 (RERA) is an Act passed by the Indian
Parliament to protect the interests of home buyers and also boost investments
in the real estate sector.
(Regulation and Development) Act, 2016 (RERA) is an Act passed by the Indian
Parliament to protect the interests of home buyers and also boost investments
in the real estate sector.
All you need to know about Real Estate Act (RERA)
Under the Real Estate Act, the central and state governments, are required to notify their own rules under the Act, six months, on the basis of the model rules framed under the central Act. The Real Estate (Regulation & Development) Act, 2016 (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 real estate sector. The Rajya Sabha passed the RERA bill on March 10, 2016, followed by the Lok Sabha on March 15, 2016 and it came into force from May 1, 2016 . 59 of its 92 sections were notified on May 1, 2016 and the remaining provisions came into force from May 1, 2017. Under the Act, the central and state governments, are required to notify their own rules under the Act, six months, on the basis of the model rules framed under the central Act.
How will RERA impact home buyers
Some of the
important compliances are:
- 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,
sub-contractors. - 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 specified time or 3 months after
majority of units have been sold. - Formation
of RWA within specified time or 3 months after majority of units have been
sold. - The
most positive aspect of this Act is that it provides a unified legal
regime for the purchase of flats; apartments, etc., and seeks to
standardise the practice across the country. Below are certain key
highlights of the Act:
Establishment of
the regulatory authority:
- 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 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. - According
to the central act, every real estate project (where the total area to be
developed exceeds 500 sq mtrs or more than 8 apartments is 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 completed and other approvals (construction
related) are in place, can the project be marketed. - 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. - 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. - Promoters
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 home buyers 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.