The Real Estate (Regulation & Development) Act, 2016, the landmark realty law to protect home buyers from unscrupulous developers, will become operational from Monday, nine years after it was conceived.
The act was cleared by Parliament in March last year. Under the act, states had to notify the realty rules and set up Real Estate Regulatory Authority (RERA) by April 30. Without notifying the rules, the law will not become operational.
However, as on April 30, just 13 of the 32 states and Union territories, including Gujarat, Uttar Pradesh, Madhya Pradesh, Maharashtra, Odisha, Delhi, and Andhra Pradesh have notified the rules.
Only one state – Madhya Pradesh – has set up RERA while 9 others including Kerala, Maharashtra, Punjab, Rajasthan, Haryana, and Delhi have set up interim regulators.
Housing ministry officials maintain that remaining states have been directed to notify their rules at the earliest.
Here’s all you need to know about the new realty law:
- It makes it mandatory for all builders – developing a project where the land exceeds 500 square metre – to register with RERA before launching or even advertising their project. Developers have been given time until July 31 to register. Not doing so will invite up to a maximum imprisonment of 3 years or fine of up to 10% of the total project cost.
- Real estate prices
The prices haven’t come down to the extent it was expected. Huge unsold inventory, lack of new demand, demonetisation amongst others has not led the builders bringing the rack rate down albeit few discounts and freebies to the customers.
Impact of RERA: Rohit Gera, MD, Gera Developments and VP Credai – Pune Metro, says, “Before RERA, the risk of delays, quality, title, and changes were borne by the customer. These will now be borne by the developer and there will be a premium that the flat purchasers will have to pay for transferring this risk to the developer. There is no room for developers to absorb these costs and so they may be transferred on to the customers by way of price increase.”
- Delayed delivery
Untimely delivery of real estate projects has been the biggest bane for the buyers. Of late, almost all projects especially projects launched 2010-2013 have defaulted in delivery within the stipulated time primarily because funds were diverted to new projects by the builders instead of using them in completing the existing ones.
Impact of RERA:Now, as per the RERA Act, the promoter has to maintain a ‘separate account’ for every project undertaken wherein 70 per cent of the money received from the buyers shall be deposited. Such funds can only be used for the purposes of construction and land cost. Real estate developers will have to furnish additional information regarding the ongoing projects for the benefit of the buyers besides depositing 70% of the unused funds in a separate bank account to ensure their completion.
- Ongoing projects
Developers will have to make public the original sanctioned plans and changes made later, total amount collected from allottees, money used, original timeline for completion and the time period within which the developer will complete the project, certified by an Engineer/Architect/practicing Chartered Accountant.
- Role of Regulatory Authority
Each Regulatory Authority in the state will have the responsibility to register and regulate real estate projects and real estate agents registered under this Act.
It will also be required to maintain a website for public viewing, of all real estate projects for which registration has been given.
- Quality of construction
The quality of the construction has also been a matter of concern with several builders. The RERA rules provides for protection against this up to 5 years after possession.
In case any structural defect or any other defect in workmanship, quality or provision of services or any other obligations of the promoter as per the agreement for sale is brought to the notice of the promoter within a period of five years, it shall be the duty of the promoter to rectify such defects without further charge, within 30 days.
- What you get to see
No promoter shall advertise, market, book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment or building, as the case may be, in any real estate project or part of it, in any planning area, without registering the real estate project with the RERA established under this Act.
Each advertisement has to carry the RERA registration number.
- Registration of projects
Make sure you buy a project which is registered with the RA. Once the state has its RA established, builders will be required to register their projects with it by furnishing all the information including, financial statements, copy of legal title deed and other documents. The builders will get a registration number project-wise i.e. tower wise.
- Delayed delivery – compensation
If the promoter fails to complete or is unable to give possession of the property within the agreed timed-period, he has to return the total amount with interest at such rate as mentioned in the agreement to sale. And, in case the buyer does not intend to withdraw from the project, he shall be paid, by the promoter, interest for every month of delay, till the handing over of the possession.
- Online information
After registration with RA, the builder will be given a login-id and password to create a page on RA’s website to upload the project related information on authority’s website. It will show quarterly up-to-date the list of number and types of apartments or plots, as the case may be, booked; quarterly up-to-date status of the project; and amongst others.
- Booking amount
Currently, most builders ask for 10 percent of the total cost of the property as a booking amount. Now as per RERA, a promoter cannot accept more than 10 percent of the cost of the property, as an advance payment or an application fee, without first entering into a registered agreement for sale.