REAL ESTATE REGULATORY ACT 2016
The real estate sector in India has always been looked upon as an unorganized sector governed by diverse state laws and particularly lacking the transparency and accountability of the promoters/developers to the buyers vis- a- vis the completion of the projects resulting in delays on committed schedules. To protect the interest of the buyers and infuse some uniformity in these diverse state enactments, the Government of India has recently passed the Real Estate Regulatory Act, 2016 (“Act“) which seeks to protect the interest of the buyers of residential and commercial real estate units by promoting transparency, accountability and efficiency in the construction and execution of real estate projects by developers/promoters. The major portions of the Act have been made effective from May 01, 2016.
According to RERA, each state and Union territory will have its own regulator and set of rules to govern the functioning of the regulator.
RERA seeks to address issues like delays, price, quality of construction, title and other changes.
Delays in projects are the biggest issue faced by buyers. The reasons are many and the impact is huge. Some have run into obstacles even before a brick was laid. The reasons include diversion of funds to other projects, changes in regulations by authorities, the environment ministry, national green tribunal etc and other bodies like those involved in infrastructure development and governing transport. Errant builders often sell projects to investors without the approval of plans, unauthorized increase in FAR, bad quality of construction, projects stuck in litigation etc.
Key provisions of RERA:
To provide clarity to buyers, developers will have to keep them informed of their other ongoing project
It will be the responsibility of each state regulator to register real estate projects and real estate agents operating in their state under RERA. The details of all registered projects will be put up on a website for public access.
RERA talks about the quality of construction in projects. Over the last few years, buyers have protested about poor of flats. The regulator will ensure protection to buyers in this matter for five years from the date of possession.
Developers can’t invite, advertise, sell, offer, market or book any plot, apartment, house, building, investment in projects, without first registering it with the regulatory authority. Furthermore, after registration, all the advertisement inviting investment will have to bear the unique RERA registration number.
If the promoter defaults on delivery within the agreed deadline, they will be required to return the entire money invested by the buyers along with the pre agreed interest rate mentioned in the contract based on the model contract given by RERA.
If the buyer chooses not to take the money back, the builder will have to pay monthly interest on each delay month to the buyer till they get delivery.
RERA mandates that developers can’t ask more than 10 per cent of the property’s cost as an advanced payment booking amount before actually signing a registered sale agreement.