The Real Estate (Regulation and Development) Act, 2016 (RERA) has come into force from May 2017. Let’s consider the advantages that RERA brings to buyers and how they will help from this Act.
Points of concern for homebuyers where there is no RERA:
- Developers promoted and sold properties based on unclear super built up area. Numerous buyers ended up spending more but really deriving minor benefits and useful space.
- Buyers had to give a booking amount to confirm their investment in a unit and later pay the total purchase consideration in one go or in installments without even knowing that how and where their money were being consumed.
- Buyers did not have a point of contact to confirm the development of the venture invested in.
- Buyers had no system to know the reliability of the development and had to just depend on the brand of the property developer or assurance made by the builder.
How RERA has taken care of the above matters:
- A unit has to be sold based on carpet area only (selling of property based on super built up area is banned under RERA). To evade the confusions at the end of builder, RERA has particularly defined ‘carpet area’ to indicate net utilizable floor area of a unit which contains area covered by the internal walls and excludes the area covered by the external walls, areas under service shafts, exclusive balconies, verandahs or open terrace areas. This will give an assurance to investors that they will pay for the real space that they are possessing.
- Builders will have to keep 70 per cent of the total amount received in a separate bank account. The abovementioned amount can be released only for the use of cost of land and cost of construction in the fixed development. The amount can only be released proportionate to the proportion of completion of the development. And the further amount can be released after obtaining the requisite certificates from engineers, architects and CA. This method will give assurance to the home buyers that their money is being used in their own project.
- It has been made compulsory for the real estate developers to maintain a website and give details of the registration approved by RERA, quarterly updates on number and type of units or plots booked, approvals granted, the current status of the development, etc. This will make sure that the investors are updated on each and every point of the project and are no longer fooled by the builders.
As well as, RERA has protected the interest of buyers in the following ways:
- Builder is liable for reimbursing the buyers for any loss or damage caused as a result of inaccurate/ false commitment made in the catalog or notice of advertisement or in relation to the sample apartment;
- Developer is prohibited from demanding more than 10 per cent as advance from the buyers without entering into a written agreement for sale;
- Interest rate (based on SBI prime lending rate) owed by the builder and the allottees in case of bad commitment to be particularly described in the agreement for sale.
- Any structural modification/ adding to the approved plan to be made only after getting a on paper consent of at least 2/3rd of the allottees (other than the developer);
- As well as transfer of the whole project to third parties would now require on paper consent of 2/3rd of the allottees and RERA;
- Any disappointment on the part of the builder to give up the possession of the property in compliance with the agreement for sale would authorize the allottees, at their will, to withdraw from the development and require refund of the amount paid with prescribed interest;
- Builder will now be accountable for setting up structural defects in the property for 5 years after giving the possession. As well, such repair work needs to be fulfilled in on time manner within 30 days of receiving of written complaint;
- Now, real estate brokers will also be required to be listed under RERA;
- Disobedience of conditions of RERA will attract a fine or/ and imprisonment up to a maximum of 3 years.
The objective of RERA is loud and clear – defend the rights and providing value for money to the buyers. In few words, it is a good reason for buyers to cheer and invest without any fear.
