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RERA simplified for home buyers

Saturday, September 29, 2018

By Rohit Gera
MD, Gera Developments Pvt Ltd

It has been a little over a year since the Real Estate (Regulation and Development) Act, 2016 has come into force and has become an essential part of the real estate industry. While the law has been enforced in many states, few others in the country are yet to implement it. RERA is good news for buyers. A controlled, regulated environment means the rights of buyers are protected. To better understand it, let’s break this down into the what’s, the how’s and what you must watch out for as a buyer.

Simply put, the Real Estate (Regulation and Development) Act, 2016 and rules framed there under has been enacted with the primary objective of regulation and promotion of the real estate sector to ensure sale of apartments or plots in an efficient and transparent manner and to protect the interests of consumers in the real estate sector.

Under the Act each state is required to set up a separate Authority and its Appellate Tribunal/s to regulate the sector and ensure speedy dispute redressal. What this means is that property-buyers can file their grievances, complaints against wrongdoings by the Builder/ Developer/ Promoter/Agents and /or grievances for the noncompliance with the Authority who ensures a speedy mechanism to address the complaints/grievances.

Under the Act all builders and developers/promoters are duty bound to not only register their new and ongoing projects with the Regulatory Authority but also disclose all & complete details of their projects on the website of the Regulatory Authority. Even, Agents who deal in the property cannot deal unless they are registered with the Authority and obtain a Registration Number.

The Act stipulates that a builder/developer/promoter cannot launch or advertise before registration with RERA. So while RERA does not regulate construction, it does not allow for sale of projects that have not been registered. Once registered, the project is under the purview of RERA and strict adherence and compliance each step, to the rules is mandated by the law.

The buyer is entitled to all information related to the project such as - Layout plan, specifications, amenities provided, title of the land, encumbrances, litigations and completion status etc. Any revision in the specifications/ layout/building plan, common areas within the project that the builder/developer/promoter wishes to make, can only be done as per the guidelines & rules laid down. Thus ensuring that buyers get what was promised to them.

Brokers and agents are also required to register and are punishable if they do not comply and abide by the directives laid down in the Act. Which means homebuyers who use the services of real estate agents and agencies will be protected and have access to quick legal redressal, should they default.

Delays in project handover is one of the biggest consumer grouses. The law allows consumers to withdraw from the project and get compensated for the full amount paid till date with interest, should the builder or developer/promoter not hand over the property by the date mentioned in the agreement.

The buyer has the option to withdraw from the project with a full refund made of amount paid with interest, should there be any false commitment or mismatch in commitment by the builder/developer/promoter.

The Act also ensures that quality standards are met by including a warranty clause 5 years after possession. The warranty covers any structural defect or any workmanship, quality, provision or services that is identified within 5 years after possession of the unit, such defect is to be rectified by the builder/developer/promoter at no extra cost within 30 days of the identification.

Buyer interests post-possession are also protected. The law stipulates that the Promoter has to enable formation of Legal Entity like Cooperative Society, Company, Association, Federation etc. strictly within the time frame and as per the rule prescribed.

In the past, developers haven’t been able to complete projects as most of the funds would get diverted towards launching new projects. The Act ensures that funds are not siphoned in that manner. The Act mandates 70 per cent of the realised money from customers to be deposited in bank accounts and used against construction progress of the said project. This reduces the risk of builder/developer/promoter insolvency apart from ensuring that the funds will be used for the purpose for which they have been raised and not diverted elsewhere, ultimately ensuring timely completion of the project.

The Act also prevents the builder/developer/promoter from taking more than 10% of the cost of the apartment as advance before entering into an agreement for sale and registration, this is something buyers must watch out for while entering into an agreement.

Carpet area calculations by developers would vary in the past. The Act has standardized the Carpet Area calculations ensuring transparency to the homebuyer. As a buyer, you need to be aware that the consideration value of the unit is to be calculated only on the carpet area.

In sum, the Act and Authority ensure that promises made by developers with respect to delivery at purchase, possession and even post-possession, are met. Only logical for buyers to be vigilant and opt for only projects that are registered under RERA.

PS: Please note that this article is meant to provide a brief overview of the Act and does not describe the Act or its interpretations, in detail. Readers are urged to refer to the RERA Act for detailed provisions.

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