What RERA can do for the Indian Real Estate Sector?

RERA or Real Estate (Regulation and Development) Act 2016 was enacted by the government on March 26, 2016. The Act came into full force on May 1, 2017 and aims to bring transparency to the real estate sector as well as protect the interests of the home buyers.

A lot of positive changes are expected to take place with the introduction of RERA. Home buyers can now expect fair and transparent transactions with the developers. The Act brings about regulations that will increase accountability and simplify property purchase. Here are some of the important features of the Real Estate Act:

  • Formation of a Regulatory Body

This is one of the most significant highlights of RERA. The real estate sector has sorely missed a regulatory body for a long period of time. This Act does the job of establishing a regulatory authority, specifically for real estate in all the states and union territories. This regulatory body is tasked with protecting the interest of stakeholders, providing a platform for grievance redressal, and maintaining a repository of accumulated data.

To prevent delays and to enable speedy resolution, the authority is required to dispose of applications within 60 days. An extension can be had if a reason is recorded for the delay. The Real Estate Appellate Authority (REAT) will serve as the platform for appeals.

  • Standards for Sale Agreements

The Act proposes the introduction of a standard model for sale agreements that are entered into by the buyer and developer. Traditionally, these agreements were heavily tilted in favour of the builders, who would insert clauses penalising buyers for defaults, while at the same time, give themselves sufficient wiggle room for similar transgressions.

To level the field, the act had been backed with suitable penalty provisions of up to 10% of the project cost and prison terms, to ensure compliance.

  • Mandatory Project Registration

Under the RERA Act 2016, any commercial or residential real estate project has to be registered with the respective state government / union territory, if they have the following characteristics:

  • Projects that are without completion certificate / occupancy certificate before the Act came into effect
  • Projects that have an area of more than 500 square metres, or more than 8 apartments in any phase

For registration, a developer needs to provide details such as approvals, details of promoter, land status, schedule of completion, etc. Only after the requisite information has been provided and the project has been registered, can the developer go ahead and market the project.

  • Opening of Escrow Account

This is a move that prevents builders from collecting funds from a project and diverting the money to start a new project. This practice eventually leads to delays in completion of projects, causing inconvenience to home buyers. Now, the developers will be required to park 70% of all project receivables into a special escrow account. The transactions from this account will only be used for construction and affiliated expenses and will have to be certified by a professional.

  • Project Update

Developers are now required to make periodic submissions to the regulator about the status of the project. This will give buyers a clear update about the progress of the project as they will be able to track the same on the RERA website.

  • Revelation of Carpet Area

In the construction industry, the area of a property is measured in carpet area, built-up area, and super built-up area. These measurements confuse buyers who don’t know the usable area they are getting. RERA rectifies this by making it mandatory for developers to reveal the carpet area of a property, which is the actual, usable area between the walls of the apartment.

Another positive aspect of RERA is that it provides a unified legal regime for the purchase of properties and eliminates variations in practices across the country. It is expected to be instrumental in achieving the honourable Prime Minister’s grand vision of affordable housing for all by 2022.

Edelweiss Partners is playing its part to make housing affordable and accessible to all by providing access to highly competitive home loan deals. Read more about the online home loan deals available through Edelweiss and the benefits for our Partners.

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